Está en la página 1de 101

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 1 of 101

1 HON. THOMAS S. ZILLY

6
IN THE UNITED STATES DISTRICT COURT
7 FOR THE WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
8
RYAN DIAZ, JARED THOMPSON, ARIEL
NO. 2:19-cv-01116-TSZ
9 ENRIQUEZ, PAUL BARR, JOHN RIOS,
DAVID GUY, LISANDRO LIZARDO, CHRIS PLAINTIFFS’ FIRST AMENDED
10 LUEBCKE, ROBERT FOUCHA, NICHOLAS CLASS ACTION COMPLAINT
YOCHHEIM, ALEC COLLINS, ZACKERY
11 REED, GRANT HOELSCHER, MICHAEL JURY TRIAL DEMANDED
OREN, NATHAN AIMSWORTH, JASON
12 COFFEY-WOLFGANG, ERIC WILSON,
LYDIA DELOACH,
13 Plaintiffs,
v.
14
NINTENDO OF AMERICA, INC.,
15 Defendant.
16
TOUSLEY BRAIN STEPHENS PLLC CHIMICLES SCHWARTZ KRINER
17 Kim D. Stephens, WSBA #11984 & DONALDSON-SMITH LLP
Jason T. Dennett, WSBA #30686 Benjamin F. Johns (pro hac vice)
18 Kaleigh N.B. Powell, WSBA #52684 Andrew W. Ferich (pro hac vice)
1700 Seventh Avenue, Suite 2200 Alex M. Kashurba (pro hac vice)
19 Seattle, Washington 98101 361 West Lancaster Avenue
Telephone: 206-682-5600 Haverford, PA 19041
20 Fax: 206-682-2992 Telephone: 610-642-8500
kstephens@tousley.com Fax: 610-649-3633
21 jdennett@tousley.com bfj@chimicles.com
kpowell@tousley.com awf@chimicles.com
22 amk@chimicles.com

23 Interim Co-Lead Counsel for Plaintiffs

TOUSLEY BRAIN STEPHENS PLLC


1700 Seventh Avenue, Suite 2200
FIRST AMENDED CLASS ACTION COMPLAINT Seattle, Washington 98101
TEL. 206.682.5600  FAX 206.682.2992
 
Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 2 of 101



7$%/(2)&217(176
 ,1752'8&7,21

 -85,6',&7,21$1'9(18(

 7+(3$57,(6

 3ODLQWLIIV

5\DQ'LD]

-DUHG7KRPSVRQ
$ULHO(QULTXH]

3DXO%DUU
-RKQ5LRV

'DYLG*X\
/LVDQGUR/L]DUGR

&KULV/XHEFNH
5REHUW)RXFKD

1LFKRODV<RFKKHLP
$OHF&ROOLQV

=DFNHU\5HHG
*UDQW+RHOVFKHU

0LFKDHO2UHQ
1DWKDQ$LQVZRUWK

-DVRQ&RIIH\:ROIJDQJ
(ULF:LOVRQ

/\GLD'H/RDFK


'HIHQGDQW


)$&78$/$//(*$7,216

 $ 6ZLWFK&RQVROH-R\&RQV
% 7HFKQLFDO1DWXUHRIWKH'HIHFW
 & &XVWRPHU&RPSODLQWV

 &RPSODLQWVDERXWWKHRULJLQDO6ZLWFKV\VWHP
&RPSODLQWVDERXWWKH6ZLWFK/LWH
 
 ' .QRZOHGJH
 
&/$66$&7,21$//(*$7,216
 
1XPHURVLW\
 ([LVWHQFH3UHGRPLQDQFHRI&RPPRQ4XHVWLRQVRI)DFWDQG/DZ
7\SLFDOLW\

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17L 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 3 of 101


 $GHTXDF\
6XSHULRULW\
 &/$,06)255(/,()

 &2817,
%5($&+2)(;35(66:$55$17<
 2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKH6WDWH6XEFODVVHV 

 &2817,,
%5($&+2)7+(,03/,(':$55$17<2)0(5&+$17$%,/,7<
 2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKH6WDWH6XEFODVVHV 

 &2817,,,
9,2/$7,2162)7+(&$/,)251,$
 &21680(5/(*$/5(0(',(6$&7
&$/&,9&2'(††HWVHT  ³&/5$´ 
 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 

 &2817,9
9,2/$7,2162)7+(&$/,)251,$81)$,5&203(7,7,21/$:
 &$/%86 352)&2'(HWVHT††  ³8&/´ 
2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 
 
8QODZIXO
 8QIDLU
)UDXGE\2PLVVLRQ
 
&28179
 9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7
)25%5($&+2)(;35(66:$55$17<
 &$/&,9&2'(††  G 
2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 
 
&28179,
 9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7
)25%5($&+2),03/,(':$55$17<
 &$/&,9&2'(††HWVHT 
2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 
 
&28179,,
 9,2/$7,2162))/25,'$¶6'(&(37,9($1'81)$,5
75$'(35$&7,&(6$&7
 )/$67$7†HWVHT ³)'873$´ 
2Q%HKDOIRI3ODLQWLII7KRPSVRQDQGWKH)ORULGD6XEFODVV 
 
 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17LL 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 4 of 101


 &28179,,,
9,2/$7,2162)7+(1(:-(56(<&21680(5)5$8'$&7
 1-67$7$11†(76(4  ³1-&)$´ 
2Q%HKDOIRI3ODLQWLIIV5LRVDQG*X\DQGWKH1HZ-HUVH\6XEFODVV 
 
&2817,;
 9,2/$7,2162)7+(1257+&$52/,1$
81)$,5$1''(&(37,9(75$'(35$&7,&(6$&7
 1&*(167$7†HWVHT ³1&8'73$´ 
2Q%HKDOIRI3ODLQWLII)RXFKDDQGWKH1RUWK&DUROLQD6XEFODVV 
 
&2817;
 9,2/$7,212)7+(,//,12,6&21680(5)5$8'
$1''(&(37,9(%86,1(6635$&7,&(6$&7
 ,//&20367$7††HWVHT ³,&)$´ 
2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV 
 
&2817;,
 9,2/$7,2162)7+(,//,12,681,)250
'(&(37,9(75$'(35$&7,&(6$&7
 ,//&20367$7††HWVHT ³,OOLQRLV'73$´ 
2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV 
 
&2817;,,
 9LRODWLRQVRIWKH:DVKLQJWRQ&RQVXPHU3URWHFWLRQ$FW
:$6+5(9&2'(††HWVHT ³:&3$´ 
 2Q%HKDOIRI3ODLQWLII'H/RDFKDQGWKH:DVKLQJWRQ6XEFODVV 

 &2817;,,,
9LRODWLRQRIWKH$UL]RQD&RQVXPHU)UDXG$FW
 $5,=5(967$7††HWVHT ³$&)$´ 
2Q%HKDOIRI3ODLQWLII(QULTXH]DQGWKH$UL]RQD6XEFODVV 
 
&2817;,9
 9,2/$7,212)7+(,'$+2&21680(53527(&7,21$&7
,'$+2&2'(††HWVHT ³,'&3$´ 
 2Q%HKDOIRI3ODLQWLII5HHGDQGWKH,GDKR6XEFODVV 

 &2817;9
9,2/$7,212)7+(2./$+20$
 &21680(53527(&7,21$&7
2./$67$7WLW††HWVHT ³2&3$´ 
 2Q%HKDOIRI3ODLQWLII+RHOVFKHUDQGWKH2NODKRPD6XEFODVV 

  

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17LLL 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 5 of 101


 &2817;9,
9,2/$7,2162)7+(0,&+,*$1&21680(53527(&7,21$&7
 0,&+&203/$:6†HWVHT ³0&3$´ 
2Q%HKDOIRI3ODLQWLII$LQVZRUWKDQGWKH0LFKLJDQ6XEFODVV 
 
&2817;9,,
 9,2/$7,2162)7+(25(*2181/$:)8/75$'(35$&7,&(6$&7
255(967$7††HWVHT ³2873$´ 
 2Q%HKDOIRI3ODLQWLII&RIIH\:ROIJDQJDQGWKH2UHJRQ6XEFODVV 

 &2817;9,,,
9,2/$7,212)1<*(1%86/$:†
 2Q%HKDOIRI3ODLQWLII/L]DUGRDQGWKH1HZ<RUN6XEFODVV 

 &2817;,;
9,2/$7,212)7+($/$%$0$'(&(37,9(
 75$'(35$&7,&(6$&7 $/$&2'(†HWVHT  ³$'73$´ 
2Q%HKDOIRI3ODLQWLII&ROOLQVDQGWKH$ODEDPD6XEFODVV 
 
&2817;;
 9LRODWLRQVRIWKH2KLR&RQVXPHU6DOHV3UDFWLFHV$FW
2+,25(9&2'($11††HWVHT ³2&63$´ 
 2Q%HKDOIRI3ODLQWLII:LOVRQDQGWKH2KLR6XEFODVV 

 &2817;;,
9,2/$7,212)7+(1(%5$6.$&21680(53527(&7,21$&7
 1(%5(967$7††HWVHT ³1&3$´ 
2Q%HKDOIRI3ODLQWLII<RFKKHLPDQGWKH1HEUDVND6XEFODVV 
 
&2817;;,,
 9,2/$7,212)7+(1(%5$6.$81,)250
'(&(37,9(75$'(35$&7,&(6$&7
 1(%5(967$7††HWVHT ³18'73$´ 
2Q%HKDOIRI3ODLQWLII<RFKKHLPDQGWKH1HEUDVND6XEFODVV 
 
&2817;;,,,
 81-867(15,&+0(17 3/($',1*,17+($/7(51$7,9( 

 &2817;;,9
'(&/$5$725<5(/,()
 3/($',1*,17+($/7(51$7,9(727+(&2175$&7%$6('&/$,06 
2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKHVWDWHVXEFODVVHV 
 
35$<(5)255(/,()
 
-85<'(0$1'

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17LY 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 6 of 101

1 FIRST AMENDED CLASS ACTION COMPLAINT

2 Plaintiffs Ryan Diaz, Jared Thompson, Ariel Enriquez, Paul Barr, John Rios, David Guy,

3 Lisandro Lizardo, Chris Luebcke, Robert Foucha, Nicholas Yochheim, Alec Collins, Zackery

4 Reed, Grant Hoelscher, Michael Oren, Nathan Aimsworth, Jason Coffey-Wolfgang, Eric Wilson,

5 Lydia DeLoach, individually, and on behalf of all others similarly situated, by and through

6 counsel, bring this action against Defendant Nintendo of America, Inc. (“Nintendo”). Plaintiffs’

7 allegations herein are based upon personal knowledge and belief as to their own acts and upon

8 the investigation of their counsel and information and belief as to all other matters.

9 INTRODUCTION

10 1. This is a class action lawsuit brought against Nintendo by Plaintiffs on behalf of

11 themselves and similarly situated consumers who purchased Nintendo Switch game systems,

12 including the original Nintendo Switch and the new Nintendo Switch Lite, as well as the

13 standalone Joy-Con controllers (collectively referred to herein as “Switch”).

14 2. The Switch is manufactured, marketed, and sold by Nintendo. The initial Switch

15 was first made available for purchase in the United States on March 3, 2017. Prior to that date, on

16 January 13, 2017, Nintendo hosted a Launch Event, the video of which is widely available on

17 YouTube (the “Launch Event”).1 Several Nintendo executives touted the durability and features

18 of the Joy-Con controllers at the Launch Event. For example, Reggie Fils-Amie, the President and

19 COO of Nintendo of America, described them as “amazing controllers [that] combine all the

20 gameplay innovations that Nintendo invented, and adds to it.”2 Yoshiaki Koizumi, the Nintendo

21

22
1
23 https://www.youtube.com/watch?v=JsiRY521Nis (last visited Sept. 26, 2019).
2
Id. at 59:40.

TOUSLEY BRAIN STEPHENS PLLC


1700 Seventh Avenue, Suite 2200
FIRST AMENDED CLASS ACTION COMPLAINT - 1 Seattle, Washington 98101
TEL. 206.682.5600  FAX 206.682.2992
 
Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 7 of 101


 6ZLWFK *HQHUDO 3URGXFHU UHPDUNHG WKDW ³HDFK MR\FRQ FDQ EH XVHG DV D IXOO\IXQFWLRQLQJ

 LQGLYLGXDOFRQWUROOHU´

  &RQWUDU\WRWKHVHFODLPVKRZHYHUWKH6ZLWFKLVGHIHFWLYH6SHFLILFDOO\WKH-R\

 &RQ MR\VWLFN FRQWUROOHUV WKDW DUH XVHG WR RSHUDWH WKH 6ZLWFK FRQWDLQ D GHIHFW WKDW UHVXOWV LQ

 FKDUDFWHUVRUJDPHSOD\PRYLQJRQWKHVFUHHQZLWKRXWXVHUFRPPDQGRUPDQXDORSHUDWLRQRIWKH

 MR\VWLFN ³'ULIWLQJ´ RU WKH ³'ULIW 'HIHFW´   7KLV GHIHFW VLJQLILFDQWO\ LQWHUIHUHV ZLWK JDPHSOD\

 DQGWKXVFRPSURPLVHVWKH6ZLWFKDQG-R\&RQFRQWUROOHU¶VFRUHIXQFWLRQDOLW\

  %DVHGRQDQDO\VLVFRQGXFWHGE\3ODLQWLIIV¶FRXQVHODQGWKHLUWHFKQLFDOH[SHUWWR

 GDWHLWDSSHDUVWKDWDSULQFLSDOFDXVHRIWKH'ULIW'HIHFWLVH[WHQVLYHZHDURQWKHSDGVXUIDFHRQ

 WKHLQWHULRURIWKH-R\&RQ$VWKHVWHHOEUXVKHVLQVLGHRIWKHMR\VWLFNPRYHEDFNDQGIRUWKWKH\

 UXE DZD\ WKH VRIW FDUERQ PDWHULDO WKDW PDNHV XS WKH SDG  7KH UHPRYHG PDWHULDO FKDQJHV WKH

 HOHFWULFDO UHVLVWDQFH RI WKH SDGV DQG SRWHQWLDOO\ OHDGV WR GULIWLQJ  7KH GLIIHUHQFH LQ VXUIDFH

 KDUGQHVV EHWZHHQ WKH VWHHO EUXVK DQG WKH FDUERQ SDG UHVXOWV LQ H[FHVVLYH ZHDU GHEULV WKDW

 FROOHFWVRQWKHVWHHOEUXVKWLSV7KLVWUDQVIHUUHGGHEULVH[DFHUEDWHVWKHZHDURIWKHSDG

  1LQWHQGR LV DZDUH RI WKH 'ULIW 'HIHFW WKURXJK RQOLQH FRQVXPHU FRPSODLQWV

 FRPSODLQWV PDGH E\ FRQVXPHUV GLUHFWO\ WR LW DQG WKURXJK LWV RZQ SUHUHOHDVH WHVWLQJ

 1RWZLWKVWDQGLQJ LWV NQRZOHGJH RI WKH GHIHFW 1LQWHQGR KDV IDLOHG WR GLVFORVH WKLV PDWHULDO

 LQIRUPDWLRQWRFRQVXPHUVDQGURXWLQHO\UHIXVHVWRUHSDLUWKHMR\VWLFNVZLWKRXWFKDUJHZKHQWKH

 'ULIW'HIHFWPDQLIHVWV)XUWKHUPRUHZKHQLWGRHVDWWHPSWWRUHSDLU RUUHSODFH WKH-R\&RQVLW

 KDVEHHQXQDEOHWRVXFFHVVIXOO\HOLPLQDWHWKHGHIHFWRUSUHYHQWLWIURPUHPDQLIHVWLQJ

  0DNLQJPDWWHUVZRUVHLQ6HSWHPEHU1LQWHQGRUHOHDVHGWKHQHZKDQGKHOG

 YHUVLRQRIWKH6ZLWFK±WKH6ZLWFK/LWH±ZKLFKKDVQRQUHPRYDEOHMR\VWLFNVDQGFRQWUROOHUVWKDW

 

Id. DW

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 8 of 101


 DOVRDSSHDUWRLQFOXGHWKHVDPHMR\VWLFNKDUGZDUHDVWKHUHJXODU6ZLWFK7KH6ZLWFK/LWHDOVRLV

 UHSRUWHGO\ SODJXHG E\ GULIWLQJ SHU D JURZLQJ QXPEHU RI RQOLQH FRPSODLQWV  1LQWHQGR NQHZ

 DERXWWKH'ULIWLQJ'HIHFWDQGWKHLVVXHVZLWKLWVFRQWUROOHUDQGMR\VWLFNKDUGZDUH\HWGHFLGHGWR

 LQFRUSRUDWHWKHPLQWRWKH6ZLWFK/LWHZLWKRXWILUVWIL[LQJWKHLVVXH

  $VDUHVXOWRI1LQWHQGR¶VXQIDLUGHFHSWLYHDQGRUIUDXGXOHQWEXVLQHVVSUDFWLFHV

 RZQHUVRI6ZLWFKHVDQG-R\&RQFRQWUROOHUVLQFOXGLQJ3ODLQWLIIVKDYHVXIIHUHGDQDVFHUWDLQDEOH

 ORVVLQMXU\LQIDFWDQGRWKHUZLVHKDYHEHHQKDUPHGE\1LQWHQGR¶VFRQGXFW

  $FFRUGLQJO\ 3ODLQWLIIV EULQJ WKLV DFWLRQ WR UHGUHVV 1LQWHQGR¶V YLRODWLRQV RI

 QXPHURXV VWDWH FRQVXPHU IUDXG VWDWXWHV EUHDFK RI H[SUHVV DQG LPSOLHG ZDUUDQW\ XQMXVW

 HQULFKPHQWDQGIRUYLRODWLRQVRI&DOLIRUQLD¶V6RQJ%HYHUO\&RQVXPHU:DUUDQW\$FW3ODLQWLIIV

 VHHN PRQHWDU\ UHOLHI IRU GDPDJHV VXIIHUHG GHFODUDWRU\ UHOLHI DV WR WKH SDUWLHV¶ ULJKWV XQGHU

 1LQWHQGR¶VZDUUDQW\DQGSXEOLFLQMXQFWLYHUHOLHI

 -85,6',&7,21$1'9(18(

  7KLV&RXUWKDVVXEMHFWPDWWHUMXULVGLFWLRQRYHUWKLVDFWLRQSXUVXDQWWR86&†

 RIWKH&ODVV$FWLRQ)DLUQHVV$FWRIEHFDXVH L WKHUHDUHRUPRUHFODVVPHPEHUV

 LL WKHUHLVDQDJJUHJDWHDPRXQWLQFRQWURYHUV\H[FHHGLQJH[FOXVLYHRILQWHUHVWDQG

 FRVWV DQG LLL  WKHUH LV PLQLPDO GLYHUVLW\ EHFDXVH DW OHDVW RQH SODLQWLII DQG RQH GHIHQGDQW DUH

 FLWL]HQV RI GLIIHUHQW VWDWHV 7KLV &RXUW DOVR KDV VXSSOHPHQWDO MXULVGLFWLRQ RYHU WKH VWDWH ODZ

 FODLPVSXUVXDQWWR86&†

  9HQXHSURSHUO\OLHVLQWKLVMXGLFLDOGLVWULFWSXUVXDQWWR86&†EHFDXVH

 1LQWHQGRWUDQVDFWVEXVLQHVVLQWKLVGLVWULFWDQGLVVXEMHFWWRSHUVRQDOMXULVGLFWLRQLQWKLVGLVWULFW

 $GGLWLRQDOO\ 1LQWHQGR KDV DGYHUWLVHG LQ WKLV GLVWULFW DQG KDVUHFHLYHG VXEVWDQWLDOUHYHQXH DQG

 SURILWV IURP LWV VDOHV RI LWV SURGXFWV LQFOXGLQJ WKH 6ZLWFK DQG -R\&RQ FRQWUROOHUV LQ WKLV

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 9 of 101


 GLVWULFW WKHUHIRUH D VXEVWDQWLDO SDUW RI WKH HYHQWV DQGRU RPLVVLRQV JLYLQJ ULVH WR WKH FODLPV

 KHUHLQRFFXUUHGLQSDUWZLWKLQWKLVGLVWULFW

  7KLV &RXUW KDV SHUVRQDO MXULVGLFWLRQ RYHU 1LQWHQGR EHFDXVH LW PDLQWDLQV LWV

 KHDGTXDUWHUV ZLWKLQ WKLV MXGLFLDO GLVWULFW KDV FRQGXFWHG VXEVWDQWLDO EXVLQHVV LQ WKLV MXGLFLDO

 GLVWULFW DQG LQWHQWLRQDOO\ DQG SXUSRVHIXOO\ SODFHG LWV SURGXFWV LQWR WKH VWUHDP RI FRPPHUFH

 ZLWKLQWKHVWDWHRI:DVKLQJWRQDQGWKURXJKRXWWKH8QLWHG6WDWHV

 7+(3$57,(6

 3ODLQWLIIV

 5\DQ'LD]

  3ODLQWLII5\DQ'LD]LVDFLWL]HQRIWKHVWDWHRI&DOLIRUQLD

  2Q -XO\   0U'LD] SXUFKDVHG D 1LQWHQGR 6ZLWFKFRQVROH DQG DQ H[WUD

 SDLURI-R\&RQFRQWUROOHUVIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  $IWHU DERXW  PRQWKV RI XVH WKH OHIW MR\VWLFN RQ WKH -R\&RQ FRQWUROOHUV WKDW

 FDPH ZLWK WKH FRQVROH EHJDQ UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\ FRQWUROOHG RU

 ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  2Q RU DURXQG -XO\   0U 'LD] VHQW WKH GHIHFWLYH -R\&RQ FRQWUROOHU WR

 1LQWHQGR IRU UHSDLU XQGHU WKHRQH\HDUZDUUDQW\7KUHHPRQWKVDIWHUUHFHLYLQJKLVUHIXUELVKHG

 -R\&RQFRQWUROOHUEDFN0U'LD]¶VFRQWUROOHUEHJDQWRH[KLELWWKHVDPH³GULIWLQJ´LVVXHDJDLQ

 7KH OHIW MR\VWLFN RQ 0U 'LD]¶V H[WUD VHW RI -R\&RQ FRQWUROOHUV DOVR EHJDQ WR H[KLELW WKH

 ³GULIWLQJ´LVVXHDIWHUDERXWPRQWKVRIXVHEXWLWZDVQRORQJHUXQGHUZDUUDQW\VR0U'LD]

 GLGQRWVHQGLWLQIRUDQRXWRISRFNHWUHSDLU

  %RWKRI0U'LD]¶VVHWVRI-R\&RQFRQWUROOHUVKDYHEHHQUHQGHUHGXQXVDEOHIRU

 JDPHSOD\DVDUHVXOWRIWKH'ULIW'HIHFW

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 10 of 101


  $V D UHVXOW RI WKH GHIHFW RQ ERWK RI KLV -R\&RQ FRQWUROOHUV 0U 'LD] KDG WR

 SXUFKDVH WZR DGGLWLRQDO OHIWKDQG -R\&RQ FRQWUROOHUV IRU DSSUR[LPDWHO\  HDFK IURP

 $PD]RQRQ$SULO

  $W WKH WLPH KH SXUFKDVHG KLV 6ZLWFK 0U 'LD] GLG QRW NQRZ DERXW WKH 'ULIW

 'HIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOG

 QRW KDYH SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO -R\&RQ FRQWUROOHUV RU ZRXOG KDYH SDLG

 VXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 -DUHG7KRPSVRQ

  3ODLQWLII-DUHG7KRPSVRQLVDFLWL]HQRIWKHVWDWHRI)ORULGD

  3ULRU WR SXUFKDVLQJ D 6ZLWFK 0U 7KRPSVRQ ZDWFKHG WKH /DXQFK (YHQW 0U

 7KRPSVRQKHDUG DQGUHOLHG XSRQ1LQWHQGR¶VUHSUHVHQWDWLRQVUHJDUGLQJWKHIXQFWLRQDOLW\RIWKH

 -R\&RQVLQGHFLGLQJWRSXUFKDVHKLV6ZLWFK,QSDUWLFXODU1LQWHQGR¶VVWDWHPHQWVUHJDUGLQJWKH

 TXDOLW\RIWKHLUFRQWUROOHUVLQIOXHQFHGKLVSXUFKDVLQJGHFLVLRQ

  2Q 0DUFK   0U 7KRPSVRQ SXUFKDVHG D 1LQWHQGR 6ZLWFK FRQVROH IRU

 DSSUR[LPDWHO\IURP:DOPDUWIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  :LWKLQ DSSUR[LPDWHO\ ILYH PRQWKV RI XVH WKH MR\VWLFN RQ WKH OHIW -R\&RQ WKDW

 FDPH ZLWK WKH FRQVROH EHJDQ UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\ FRQWUROOHG 7KLV

 UHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  ,QRUDURXQG2FWREHU0U7KRPSVRQVHQWWKHGHIHFWLYH-R\&RQFRQWUROOHU

 WR1LQWHQGRIRUUHSDLUDVLWZDVVWLOOXQGHUZDUUDQW\

  6HYHUDO PRQWKV DIWHU UHFHLYLQJ KLV UHSDLUHG -R\&RQ FRQWUROOHU WKH FRQWUROOHU

 EHJDQWRH[KLELWWKHVDPH³GULIWLQJ´LVVXHVDJDLQ



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 11 of 101


  ,QWRWDO0U7KRPSVRQHQGHGXSKDYLQJWKHVDPHSDLURISXUSRUWHGO\IL[HG-R\

 &RQFRQWUROOHUVUHSDLUHGWKUHHWLPHV

  2QO\ DIWHU VHQGLQJ WKH FRQWUROOHU EDFN IRU UHSDLU D IRXUWK WLPH GLG 1LQWHQGR

 ILQDOO\GHFLGHWRSURYLGH0U7KRPSVRQZLWKDQHZ-R\&RQFRQWUROOHUVHW

  $VDUHVXOWRIWKHGHIHFWRQKLVFRQWUROOHU1LQWHQGR¶VLQDELOLW\WRUHSDLULWDQGWKH

 ZHHNV VSHQW PDLOLQJ LW WR DQG IURP 1LQWHQGR 0U 7KRPSVRQ KDG WR SXUFKDVH WZR 3UR

 FRQWUROOHUVIRUDSSUR[LPDWHO\WRWDODQGRQH-R\&RQEXQGOHIRUDSSUR[LPDWHO\

  $W WKH WLPH KH SXUFKDVHG KLV 6ZLWFK 0U 7KRPSVRQ GLG QRW NQRZ DERXW WKH

 GHIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOG

 QRW KDYH SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO -R\&RQ FRQWUROOHUV RU ZRXOG KDYH SDLG

 VXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 $ULHO(QULTXH]

  3ODLQWLII$ULHO(QULTXH]LVDFLWL]HQRIWKHVWDWHRI$UL]RQD

  3ULRUWRSXUFKDVLQJD6ZLWFK0U(QULTXH]ZDWFKHGWKHOLYHVWUHDPRIWKH/DXQFK

 (YHQWZKLFKH[FLWHGKLPDQGKLVFKLOGUHQUHJDUGLQJWKHSURGXFW0U(QULTXH]KHDUGDQGUHOLHG

 XSRQ 1LQWHQGR¶V UHSUHVHQWDWLRQV UHJDUGLQJ WKH IXQFWLRQDOLW\ RI WKH -R\&RQV LQ GHFLGLQJ WR

 SXUFKDVH KLV 6ZLWFK  7KH IXQFWLRQDOLW\ DQG UHPRYDELOLW\ RI WKH -R\&RQV ZDV SDUWLFXODUO\

 HQWLFLQJWR0U(QULTXH]DQGLQIOXHQFHGKLVSXUFKDVLQJGHFLVLRQ

  2Q0DUFK3ODLQWLIISXUFKDVHGD1LQWHQGR6ZLWFKFRQVROHDQGDQ H[WUD

 SDLU RI -R\&RQ FRQWUROOHUV IRU DSSUR[LPDWHO\  IURP %HVW %X\ IRU SHUVRQDO IDPLO\ RU

 KRXVHKROGXVH





7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 12 of 101


  :LWKLQDSSUR[LPDWHO\DPRQWKRIXVHWKHOHIWMR\VWLFNRQWKH-R\&RQFRQWUROOHUV

 WKDWFDPHZLWKWKHFRQVROHEHJDQUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU

 ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  %HJLQQLQJ RQ RU DURXQG $SULO   0U (QULTXH] UHDFKHG RXW WR 1LQWHQGR

 GLUHFWO\DERXWWKH³GULIW´LVVXHKLVFRQWUROOHUVZHUHH[KLELWLQJ1LQWHQGRHQGHGXSUHSODFLQJ RU

 UHSDLULQJ  WKH ILUVW VHW RI -R\&RQ FRQWUROOHUV KH VHQW WR LW IRU ZDUUDQW\ VHUYLFH 7KH LVVXH

 UHVXUIDFHG RQ DOO WKHVH FRQWUROOHUV DIWHU VHYHUDO PRQWKV RI XVH XSRQ EHLQJ UHWXUQHG WR 0U

 (QULTXH]

  0U(QULTXH]DOVRSXUFKDVHGDGGLWLRQDOFRQWUROOHUVGXHWRWKHUHFXUUHQWQDWXUHRI

 WKH³GULIW´LVVXH,QRUDURXQG2FWREHUKHERXJKWDVHWRIWKHQHRQ\HOORZ$UPVWKHPHG

 -R\&RQ FRQWUROOHUV IURP *DPH6WRS DQG D VHW RI WKH JUHHQ DQG SLQN 6SODWRRQ  WKHPHG

 FRQWUROOHUVIRUDSSUR[LPDWHO\WRWDOHDFKFRQWUROOHUFRVWLQJDSSUR[LPDWHO\LQGLYLGXDOO\

 +H DOVR SXUFKDVHG DQRWKHU JUH\ VHW RI -R\&RQ FRQWUROOHUV IRU DSSUR[LPDWHO\  IURP

 *DPH6WRSLQRUDURXQG2FWREHU$OORIWKHVHSDLUVHQGHGXSKDYLQJ³GULIW´LVVXHV

  $OOVL[VHWVRI0U(QULTXH]¶V-R\&RQFRQWUROOHUVKDYHEHHQUHQGHUHGXQXVDEOH

 GXHWRWKH'ULIW'HIHFW

  $VDUHVXOWRIWKHGHIHFWRQERWKRIKLV-R\&RQFRQWUROOHUV0U(QULTXH]KDGWR

 SXUFKDVHWZRDGGLWLRQDO3URFRQWUROOHUVRQRUDURXQG1RYHPEHUIRUDSSUR[LPDWHO\

 IURP:DOPDUW

  $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U(QULTXH]GLGQRWNQRZDERXWWKHGHIHFW

 DQG 1LQWHQGR GLG QRW GLVFORVH LW WR KLP +DG KH NQRZQ DERXW WKH 'ULIW 'HIHFW KH ZRXOG QRW




7KH3UR&RQWUROOHULVDGLIIHUHQWPRGHORIFRQWUROOHUVROGE\1LQWHQGRWKDWZRUNVZLWKWKH
 RULJLQDO6ZLWFKV\VWHPIRUXVHUVZKRSUHIHUDJDPLQJH[SHULHQFHPRUHOLNHD3OD\6WDWLRQRU
;ER[

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 13 of 101


 KDYH SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO FRQWUROOHUV RU ZRXOG KDYH SDLG VXEVWDQWLDOO\ OHVV IRU

 WKHPWKDQKHGLG

 3DXO%DUU

  3ODLQWLII3DXO%DUULVDFLWL]HQRIWKH&RPPRQZHDOWKRI0DVVDFKXVHWWV

  3ULRUWRSXUFKDVLQJD6ZLWFK0U%DUUYLHZHGSRUWLRQVRIWKH/DXQFK(YHQW

  ,Q RU DURXQG $XJXVW  0U %DUU SXUFKDVHG D 1LQWHQGR 6ZLWFK FRQVROH IRU

 IURP*DPH6WRSLQ0LGGOHWRZQ5KRGH,VODQGIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  :LWKLQ DSSUR[LPDWHO\ WKUHH PRQWKV RI XVH WKH MR\VWLFN RQ WKH -R\&RQ

 FRQWUROOHUV WKDW FDPH ZLWK WKH FRQVROH EHJDQ UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\

 FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  ,QRUDURXQG0DUFK0U%DUUFRQWDFWHG1LQWHQGRVXSSRUWDERXWWKHLVVXH

 DQG WKH 1LQWHQGR UHSUHVHQWDWLYH VWDWHG WKDW WKH ³GULIW´ LVVXH ZDV FDXVHG E\ H[WHQVLYH XVH

 WKHUHIRUH LW ZDV QRW FRYHUHG XQGHU ZDUUDQW\ 7KH UHSUHVHQWDWLYH UHFRPPHQGHG KDYLQJ WKH

 FRQWUROOHUVUHSDLUHGE\1LQWHQGRRUDORFDOUHSDLUVKRSDWKLVRZQH[SHQVH

  0U %DUU GHFLGHG WR EX\ D QHZ VHW RI -R\&RQ FRQWUROOHUV IRU  IURP

 *DPH6WRSLQ0LGGOHWRZQ5KRGH,VODQGKDYLQJUHDGRQYDULRXVIRUXPVWKDWWKHUHSDLUSURFHVV

 FDQWDNHDORQJWLPH$IWHUVHYHUDOPRQWKVRIXVHKLVUHSODFHPHQWSDLUKDVDOVREHJXQH[KLELWLQJ

 WKH³GULIW´LVVXH0U%DUUVWLOOUHWDLQVWKHXQXVDEOH-R\&RQFRQWUROOHUV

  $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U%DUUGLGQRWNQRZDERXWWKHGHIHFWDQG

 1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYH

 SXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRUKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHP

 WKDQKHGLG



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 14 of 101


  0U %DUU SURYLGHG 1LQWHQGR ZLWK D SUHVXLW GHPDQG DQG QRWLFH XQGHU WKH

 0DVVDFKXVHWWVFRQVXPHUIUDXGVWDWXH

 -RKQ5LRV

  3ODLQWLII-RKQ5LRVLVDFLWL]HQRIWKHVWDWHRI1HZ-HUVH\

  2Q0DUFK0U5LRVSXUFKDVHGD1LQWHQGR6ZLWFKFRQVROHIRU

 IURP $PD]RQ IRU SHUVRQDO IDPLO\ RU KRXVHKROG XVH %HIRUH SXUFKDVLQJ WKH 6ZLWFK 0U 5LRV

 YLHZHGWKH/DXQFK(YHQW

  :LWKLQDSSUR[LPDWHO\IRXUPRQWKVRIXVHWKHOHIWDQGULJKWMR\VWLFNRQWKH-R\

 &RQ FRQWUROOHUVWKDWFDPH ZLWKWKHFRQVROHEHJDQH[SHULHQFLQJ³GULIWLQJ´7KLVUHVXOWHGLQWKH

 -R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  ,QRUDURXQG-XO\0U5LRVFRQWDFWHG1LQWHQGRVXSSRUWDERXWWKHLVVXHDQG

 WKH 1LQWHQGR UHSUHVHQWDWLYH VXJJHVWHG WKDW KH ZDLW ORQJHU DV D VRIWZDUH XSGDWH WKDW ZRXOG

 SXUSRUWHGO\IL[WKHLVVXHZDVLQWKHSLSHOLQH7RGDWHLWDSSHDUVWKDWQRVXFKXSGDWHKDVEHHQ

 UHOHDVHG

  6LQFH KLV RULJLQDO SDLU KDV KDG LVVXHV 0U 5LRV KDV SXUFKDVHG ILYH DGGLWLRQDO

 SDLUVRI-R\&RQFRQWUROOHUVIRUDWRWDOSULFHRIDSSUR[LPDWHO\$OORIKLVFRQWUROOHUSDLUV

 KDYHKDG³GULIW´LVVXHV+HUHWDLQVDOOILYHSDLUVRIXQXVDEOH-R\&RQFRQWUROOHUV

  $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U5LRVGLGQRWNQRZDERXWWKHGHIHFWDQG

 1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYH

 SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO FRQWUROOHUV RU ZRXOG KDYH SDLG VXEVWDQWLDOO\ OHVV IRU WKHP

 WKDQKHGLG

 'DYLG*X\

  3ODLQWLII'DYLG*X\LVDUHVLGHQWRIWKH&RPPRQZHDOWKRI9LUJLQLD

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 15 of 101


  3ULRU WR SXUFKDVLQJ D 6ZLWFK 0U *X\ ZDWFKHG WKH /DXQFK (YHQW DQG

 VXEVHTXHQWO\ZDWFKHGSRUWLRQVRIWKHYLGHRDJDLQ0U*X\KHDUGDQGUHOLHGXSRQ1LQWHQGR¶V

 UHSUHVHQWDWLRQVUHJDUGLQJWKHIXQFWLRQDOLW\RIWKH-R\&RQVLQGHFLGLQJWRSXUFKDVHKLV6ZLWFK

 7KH LQFOXVLRQ RI -R\&RQV ZLWK WKH 6ZLWFK ZDV SDUWLFXODUO\ HQWLFLQJ WR 0U *X\ EHFDXVH LW

 PHDQW KH ZRXOG QRW QHHG WR SXUFKDVH VHSDUDWH -R\&RQV ZKLFK LQIOXHQFHG KLV SXUFKDVLQJ

 GHFLVLRQ

  2Q 0DUFK   0U *X\ SXUFKDVHG D 1LQWHQGR 6ZLWFK FRQVROH IRU

 DSSUR[LPDWHO\IURP7DUJHWIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH$WWKLVWLPHKHZDVD

 UHVLGHQWDQGFLWL]HQRIWKHVWDWHRI1HZ-HUVH\

  :LWKLQDSSUR[LPDWHO\WKUHHPRQWKVRIXVHWKHOHIWDQGULJKWMR\VWLFNRQWKH-R\

 &RQFRQWUROOHUVWKDWFDPHZLWKWKHFRQVROHEHJDQUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\

 FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  ,QRUDURXQG-XQH0U*X\VHQWKLVHQWLUHFRQVROHWR1LQWHQGRDORQJZLWK

 KLV-R\&RQFRQWUROOHUVWRKDYHLWGLDJQRVHGDQGUHSDLUHG1LQWHQGRHQGHGXSUHSODFLQJWKHOHIW

 FRQWUROOHU

  0U *X\ GHFLGHG WR EX\ D QHZ VHW RI -R\&RQ FRQWUROOHUV IURP *DPH6WRS IRU

 DSSUR[LPDWHO\$IWHUVHYHUDOPRQWKVRIXVHKLVUHSODFHPHQWSDLUKDVDOVREHJXQH[KLELWLQJ

 WKH³GULIW´LVVXH3ODLQWLIIVWLOOUHWDLQVWKHXQXVDEOH-R\&RQFRQWUROOHUV+HKDVVLQFHSXUFKDVHGD

 VSHFLDODGDSWHUIRUDSSUR[LPDWHO\WKDWDOORZVKLPWRXVHKLV3OD\6WDWLRQFRQWUROOHULQSODFH

 RIWKH-R\&RQFRQWUROOHU

  $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK3ODLQWLIIGLGQRWNQRZDERXWWKHGHIHFWDQG

 1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYH



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 16 of 101


 SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO FRQWUROOHUV RU ZRXOG KDYH SDLG VXEVWDQWLDOO\ OHVV IRU WKHP

 WKDQKHGLG

 /LVDQGUR/L]DUGR

  3ODLQWLII/LVDQGUR/L]DUGRLVDFLWL]HQRIWKHVWDWHRI1HZ<RUN

  2Q -DQXDU\   0U /L]DUGR SXUFKDVHG RQH 1LQWHQGR 6ZLWFK FRQVROH IRU

 IURP%HVW%X\IRUSHUVRQDOIDPLO\RUKRXVHKROGXVH+HDOVRSXUFKDVHGDQRWKHUIRUKLV

 VRQIRUWKHVDPHDPRXQWDURXQGWKHVDPHWLPH

  :LWKLQ DSSUR[LPDWHO\ VL[ PRQWKV RI XVH WKH OHIW DQG WKH ULJKW MR\VWLFN RQ WKH

 -R\&RQ FRQWUROOHUV WKDW FDPH ZLWK WKH FRQVROH EHJDQ UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ

 PDQXDOO\ FRQWUROOHG RU ³GULIWLQJ´ 7KLV UHVXOWHG LQ WKH -R\&RQ EHLQJ XQXVDEOH IRU JHQHUDO

 JDPHSOD\

  ,Q RU DURXQG 0DUFK 0U/L]DUGRVHQWKLV-R\&RQFRQWUROOHUVWRKDYHWKH

 ³GULIW´ LVVXH GLDJQRVHG DQG KRSHIXOO\ UHSDLUHG 7KH WKLUGSDUW\ UHSDLU VHUYLFH FRQWUDFWHG E\

 1LQWHQGRWRSURYLGHJDPLQJFRQVROHUHSDLUVLQIRUPHGKLPVHYHUDOZHHNVODWHUWKDWWKHFRVWRI

 UHSDLUVIRUWKH³GULIW´LVVXHZRXOGEHDSSUR[LPDWHO\

  0U/L]DUGRGHFOLQHGWRSD\WKHUHSDLUFRVWDQGLQVWHDGKDGKLVFRQWUROOHUUHSDLUHG

 DWDORFDOUHSDLUVKRSIRU

  6LQFH WKH UHSDLU KLV RWKHU FRQWUROOHU DV ZHOO DV WKH -R\&RQ FRQWUROOHUV IRU KLV

 VRQ¶V6ZLWFKFRQVROHKDYHEHJXQH[SHULHQFLQJWKH³GULIW´LVVXH+HVWLOOUHWDLQVDOOWKHXQXVDEOH

 -R\&RQFRQWUROOHUV

  $W WKH WLPH KH SXUFKDVHG KLV WZR 6ZLWFK FRQVROHV 0U /L]DUGR GLG QRW NQRZ

 DERXWWKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFW



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 17 of 101


 KH ZRXOG QRW KDYH SXUFKDVHG ERWK 6ZLWFK FRQVROHV RU ZRXOG KDYH SDLG VXEVWDQWLDOO\ OHVV IRU

 WKHPWKDQKHGLG

 &KULV/XHEFNH

  3ODLQWLII&KULV/XHEFNHLVDFLWL]HQRIWKHVWDWHRI&DOLIRUQLD

  2Q1RYHPEHU0U/XHEFNHSXUFKDVHGWKUHH1LQWHQGR6ZLWFKFRQVROHV

 IRUKLVWKUHHFKLOGUHQIURP:DOPDUWIRUDSSUR[LPDWHO\SHUXQLW$OOWKUHHZHUHSXUFKDVHG

 IRUSHUVRQDODQGKRXVHKROGXVH

  :LWKLQ DSSUR[LPDWHO\ VL[ PRQWKV RI XVH WKH OHIW DQG ULJKW MR\VWLFNV RQERWK RI

 WKH -R\&RQ FRQWUROOHUV WKDW FDPH ZLWK FDPH ZLWK WZR RI WKH FRQVROHV EHJDQ UHJLVWHULQJ

 PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\ FRQWUROOHG RU ³GULIWLQJ´ 7KLV UHVXOWHG LQ WKH -R\&RQ

 FRQWUROOHUVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  ,Q RU DURXQG $SULO  0U /XHEFNH VHQW WKH OHIW FRQWUROOHUV LQ IRU ERWK

 FRQVROHVWRKDYHWKHPUHSDLUHGXQGHUZDUUDQW\$ERXWDPRQWKODWHUERWKULJKWFRQWUROOHUVZHUH

 WKHQVHQWLQWREHUHSDLUHGXQGHUZDUUDQW\$IWHUVHYHUDOPRQWKVRIXVHDOOIRXURIWKHVHUHSDLUHG

 FRQWUROOHUVHQGHGXSKDYLQJWKH³GULIW¶LVVXHDJDLQ

  7R GDWH 0U /XHEFNH KDV KDG WR SXUFKDVH VL[ DGGLWLRQDO SDLUV RI -R\&RQ

 FRQWUROOHUVIRUDWRWDORIDSSUR[LPDWHO\ZKLFKKDYHDOOH[SHULHQFHGWKH³GULIW´LVVXH

  $WWKHWLPHKHSXUFKDVHGKLVWKUHH6ZLWFKFRQVROHV0U/XHEFNHGLGQRWNQRZ

 DERXWWKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFW

 KHZRXOGQRWKDYHSXUFKDVHGWKHWKUHH6ZLWFKFRQVROHVRUDGGLWLRQDOFRQWUROOHUVRUZRXOGKDYH

 SDLGVXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 5REHUW)RXFKD

  3ODLQWLII5REHUW)RXFKDLVDFLWL]HQRIWKHVWDWHRI1RUWK&DUROLQD

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 18 of 101


  ,Q RU DURXQG -XO\  0U )RXFKD SXUFKDVHG D 1LQWHQGR 6ZLWFK FRQVROH IRU

 SHUVRQDOIDPLO\RUKRXVHKROGXVHIURPD*DPH6WRSLQ(OL]DEHWK&LW\1RUWK&DUROLQD

  :LWKLQ DSSUR[LPDWHO\ WKUHH PRQWKV RI XVH WKH OHIW MR\VWLFN RQ WKH -R\&RQ

 FRQWUROOHUV WKDW FDPH ZLWK WKH FRQVROH EHJDQ UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\

 FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  ,Q RU DURXQG 2FWREHU  0U )RXFKD FRQWDFWHG 1LQWHQGR VXSSRUW ZKLFK

 LQVWUXFWHGKLPWRVHQGKLVFRQWUROOHULQIRUDGLDJQRVWLFVLQFHLWZDVXQGHUZDUUDQW\$IWHUWKH

 FRQWUROOHUZDVGLDJQRVHG1LQWHQGRIROORZHGXSZLWKKLPDQGUHTXHVWHGWKDWKHSD\IRU

 WKH UHSDLU 0U )RXFKD HQGHG XS SD\LQJ WKLV EDODQFH LQ RUGHU WR KDYH WKH GHIHFWLYH FRQWUROOHU

 UHSDLUHG

  6LQFH EHLQJ UHSDLUHG WKH -R\&RQ FRQWUROOHUV KDYH RQFH DJDLQ H[KLELWHG WKH

 ³GULIW´LVVXHDJDLQ+HUHWDLQVKLVXQXVDEOH-R\&RQFRQWUROOHUV

  $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U)RXFKDGLGQRWNQRZDERXWWKHGHIHFW

 DQG 1LQWHQGR GLG QRW GLVFORVH LW WR KLP +DG KH NQRZQ DERXW WKH GHIHFW KH ZRXOG QRW KDYH

 SXUFKDVHGKLV6ZLWFKRUZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRULWWKDQKHGLG

 1LFKRODV<RFKKHLP

  3ODLQWLII1LFKRODV<RFKKHLPLVDFLWL]HQRIWKHVWDWHRI1HEUDVND

  2Q RU DURXQG -DQXDU\   0U <RFKKHLP SXUFKDVHG D 1LQWHQGR 6ZLWFK

 FRQVROHIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  :LWKLQDSSUR[LPDWHO\WKHILUVWGD\WKHULJKWMR\VWLFNRQWKH-R\&RQFRQWUROOHUV

 WKDWFDPHZLWKWKHFRQVROHEHJDQUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU

 ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 19 of 101


  2Q$XJXVW0U<RFKKHLPFRQWDFWHG1LQWHQGRVXSSRUWDIWHUUHDGLQJWKH

 QHZVWKDW1LQWHQGRZDVQRZRIIHULQJIUHHUHSDLUVIRUWKRVHZLWK-R\&RQFRQWUROOHUVKDYLQJWKH

 ³GULIW´ LVVXH  +H VHQW ERWK FRQWUROOHUV LQWR 1LQWHQGR IRU D UHSDLU  +H UHFHLYHG KLV UHSDLUHG

 FRQWUROOHUVEDFNRQ$XJXVW

  $OPRVWLPPHGLDWHO\WKHUHDIWHU0U<RFKKHLPEHJDQKDYLQJWKH³GULIW´LVVXHRQ

 WKH UHSDLUHG VHW RI -R\&RQ FRQWUROOHUV +H RQFH DJDLQ IROORZHGXS ZLWK 1LQWHQGR VXSSRUW RQ

 6HSWHPEHUDQG1LQWHQGRVKLSSHGKLPDQHZVHWRI-R\&RQFRQWUROOHUV

  2Q 6HSWHPEHU  0U <RFKKHLP UHFHLYHG WKH QHZ VHW RI -R\&RQ FRQWUROOHUV

 ZKLFKEHJDQWRKDYHWKH³GULIW´LVVXHRQFHDJDLQ+HUHWDLQVERWKXQXVDEOH-R\&RQFRQWUROOHUV

  $W WKH WLPH KH SXUFKDVHG KLV 6ZLWFK 0U <RFKKHLP GLG QRW NQRZ DERXW WKH

 GHIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOG

 QRWKDYHSXUFKDVHGKLV6ZLWFKRUZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRULWWKDQKHGLG

 $OHF&ROOLQV

  3ODLQWLII$OHF&ROOLQVLVDFLWL]HQRIWKHVWDWHRI$ODEDPD

  ,Q RU DURXQG 2FWREHU  0U &ROOLQV SXUFKDVHG D QHZ 1LQWHQGR 6ZLWFK

 FRQVROHIURP*DPH6WRSIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  $URXQG-DQXDU\ERWKWKHOHIWDQGULJKWMR\VWLFNVRQWKH-R\&RQFRQWUROOHUV

 WKDWFDPHZLWKWKHFRQVROHEHJDQUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU

 ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  0U&ROOLQVWKRXJKWVRPHWKLQJZDVZURQJZLWKWKH-R\&RQFRQWUROOHUVWKDWFDPH

 ZLWKWKHFRQVROH,QRUDURXQG)HEUXDU\RI0U&ROOLQVSXUFKDVHGDUHSODFHPHQW-R\&RQ

 FRQWUROOHUIURP$PD]RQIRUDSSUR[LPDWHO\7KHQHZFRQWUROOHUFDPHZLWKDGLJLWDOEXQGOH

 RIJDPH6XSHU0DULR3DUW\

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 20 of 101


  %\0D\ERWKWKHOHIWDQGULJKWMR\VWLFNVRQ0U&ROOLQV¶UHSODFHPHQW-R\

 &RQFRQWUROOHUVKDGEHJXQWR³GULIW´

  0U&ROOLQVFDOOHG1LQWHQGRLQ0D\7KH1LQWHQGRUHSUHVHQWDWLYHWROG0U

 &ROOLQVWKDWWKHLVVXHZDVDXVHUHUURUQRWDGHVLJQGHIHFW7KH1LQWHQGRUHSUHVHQWDWLYHWROG0U

 &ROOLQVWRVHQGERWKRIKLV-R\&RQVLQIRUUHSDLUDQGWKDWKHZRXOGEHFKDUJHGIRUWKHUHSDLURI

 ERWK-R\&RQVHYHQWKRXJK0U&ROOLQV¶FRQVROHZDVVWLOOZLWKLQZDUUDQW\0U&ROOLQVGLGQRW

 ZDQW WR SD\ DQG KDYH WR ZDLW IRU UHSDLUV 0U &ROOLQV LQVWHDG ERXJKW WKUHH 3UR FRQWUROOHUV IRU

 DSSUR[LPDWHO\HDFKIURP*DPH6WRSWRUHSODFHWKH-R\&RQFRQWUROOHUV

  %RWKRI0U&ROOLQV¶VHWVRI-R\&RQFRQWUROOHUVZHUHUHQGHUHGXQXVDEOH+HVWLOO

 UHWDLQVERWKXQXVDEOH-R\&RQFRQWUROOHUV

  $W WKH WLPH KH SXUFKDVHG KLV 6ZLWFK 0U &ROOLQV GLG QRW NQRZ DERXW WKH 'ULIW

 'HIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOG

 QRWKDYHSXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRUZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRU

 WKHPWKDQKHGLG

 =DFNHU\5HHG

  3ODLQWLII=DFNHU\5HHGLVDFLWL]HQRIWKHVWDWHRI,GDKR

  0U5HHGSXUFKDVHGD1LQWHQGR6ZLWFKFRQVROHIRUDSSUR[LPDWHO\IURP

 :DOPDUWLQ0D\IRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  0U5HHGSXUFKDVHGDVHFRQGSDLURI-R\&RQFRQWUROOHUVIRUDSSUR[LPDWHO\

 IURP*DPH6WRSDSSUR[LPDWHO\RQHZHHNDIWHUSXUFKDVLQJWKHFRQVROHLQRUDURXQG0D\

  $SSUR[LPDWHO\WKUHHPRQWKVDIWHUSXUFKDVHWKHOHIWMR\VWLFNLQERWKSDLUVRI0U

 5HHG¶V-R\&RQFRQWUROOHUVEHJDQUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU

 ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 21 of 101


  ,QRUDURXQG$XJXVW0U5HHGFRQWDFWHG:DOPDUWDQG*DPH6WRSDERXWWKH

 ³GULIW´LVVXH5HSUHVHQWDWLYHVIURPERWKVWRUHVGLUHFWHG0U5HHGWRFRQWDFW1LQWHQGR0U5HHG

 FDOOHG 1LQWHQGR DQG VSRNH ZLWK D 1LQWHQGR UHSUHVHQWDWLYH LQ RU DURXQG $XJXVW  7KH

 1LQWHQGRUHSUHVHQWDWLYHGLGQRWRIIHU0U5HHGDQ\UHFRXUVH7KHUHSUHVHQWDWLYHGLGQRWRIIHUWR

 WDNH WKH FRQWUROOHUV LQ IRU UHSDLU WKH\ RQO\ LPSOLHG WKDW 0U 5HHG VKRXOG SXUFKDVH QHZ

 FRQWUROOHUV

  %RWK VHWV RI 0U 5HHG¶V -R\&RQ FRQWUROOHUV FRQWLQXH WR H[KLELW WKH GULIW LVVXH

 +HVWLOOUHWDLQVERWKXQXVDEOH-R\&RQFRQWUROOHUV

  $W WKH WLPH KH SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO FRQWUROOHU 0U 5HHG GLG QRW

 NQRZDERXWWKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHWKHGHIHFWWRKLP+DG0U5HHGNQRZQ

 DERXWWKHGHIHFWKHZRXOGQRWKDYHSXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRUKHZRXOG

 KDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 *UDQW+RHOVFKHU

  3ODLQWLII*UDQW+RHOVFKHULVDFLWL]HQRIWKHVWDWHRI2NODKRPD

  2Q0DUFK0U+RHOVFKHUSXUFKDVHGD1LQWHQGR6ZLWFKFRQVROHDQGDQ

 H[WUD -R\&RQ FRQWUROOHU VHW IURP D *DPH6WRS LQ 1RUPDQ 2NODKRPD IRU SHUVRQDO IDPLO\ RU

 KRXVHKROGXVH

  :LWKLQVL[PRQWKVRISXUFKDVHWKHOHIWMR\VWLFNVRQERWKVHWVRI0U+RHOVFKHU¶V

 -R\&RQFRQWUROOHUVEHJDQWRUHJLVWHUPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU³GULIW´

 7KLVUHVXOWHGLQWKH-R\&RQVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  0U+RHOVFKHUFDOOHG1LQWHQGRDERXWWKHGULIWLVVXHRQWKHOHIW-R\&RQWKDWFDPH

 ZLWK WKH FRQVROH RQ $XJXVW   7KH 1LQWHQGR UHSUHVHQWDWLYH GLUHFWHG KLP WR DQ RQOLQH

 KHOS DUWLFOH ZLWK LQVWUXFWLRQV RQ KRZ WR FOHDU REVWUXFWLRQV UHERRW WKH V\VWHP DQG UHFRQILJXUH

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 22 of 101


 WKH FRQWUROOHUV 0U +RHOVFKHU DWWHPSWHG WKH VXJJHVWHG IL[HV EXW WKH GULIWLQJ SHUVLVWHG 0U

 +RHOVFKHUFDOOHG1LQWHQGREDFN7KH1LQWHQGRUHSUHVHQWDWLYHVDLG0U+RHOVFKHUFRXOGVHQGKLV

 -R\&RQ LQ IRU DQ RXWRIZDUUDQW\ UHSDLU 7KH UHSUHVHQWDWLYH DVNHG IRU 0U +RHOVFKHU¶V FUHGLW

 FDUG QXPEHU LQ RUGHU WR FKDUJH KLP  IRUWKH UHSDLU0U +RHOVFKHU GHFOLQHGWR VHQG WKH

 -R\&RQWR1LQWHQGREHFDXVHKHGLGQRWZDQWWREHFKDUJHGIRUWKHUHSDLU

  0U +RHOVFKHU KDV QRW SXUFKDVHG D QHZ -R\&RQ FRQWUROOHU VHW EHFDXVH KH KDV

 UHDGLQ RQOLQH IRUXPV WKDW HYHQ QHZ-R\&RQFRQWUROOHUVVWLOOH[KLELW WKH VDPH GULIW LVVXH0U

 +RHOVFKHU KDV LQVWHDG KDG WR UHVRUW WR XVLQJ D 3UR FRQWUROOHU EHFDXVH KLV -R\&RQ FRQWUROOHUV

 ZHUHUHQGHUHGXQXVDEOH0U+RHOVFKHUSXUFKDVHGWKH3URFRQWUROOHUIURP7DUJHWIRURQ

 -XQH+HVWLOOUHWDLQVERWKXQXVDEOH-R\&RQFRQWUROOHUV

  $WWKHWLPH0U+RHOVFKHUSXUFKDVHGKLV6ZLWFKDQGH[WUD-R\&RQFRQWUROOHUVHW

 0U+RHOVFKHUGLGQRWNQRZDERXWWKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHWKHGHIHFWWRKLP

 +DG0U+RHOVFKHUNQRZQDERXWWKHGHIHFWKHZRXOGQRWKDYHSXUFKDVHGKLV6ZLWFKRU-R\&RQ

 FRQWUROOHUVHWRUKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 0LFKDHO2UHQ

  3ODLQWLII0LFKDHO2UHQLVDFLWL]HQRIWKHVWDWHRI,OOLQRLV

  2Q -DQXDU\   0U 2UHQ SUHRUGHUHG D 1LQWHQGR 6ZLWFK FRQVROH IURP

 $PD]RQIRUIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH0U2UHQSXUFKDVHGDVHFRQG-R\

 &RQFRQWUROOHUIRURQ$SULODOVRIURP$PD]RQ3ULRUWRSXUFKDVLQJKLV6ZLWFK

 0U 2UHQ YLHZHG SRUWLRQV RI WKH /DXQFK (YHQW 0U 2UHQ KHDUG DQG UHOLHG XSRQ 1LQWHQGR¶V

 UHSUHVHQWDWLRQVUHJDUGLQJWKHIXQFWLRQDOLW\RIWKH-R\&RQVLQGHFLGLQJWRSXUFKDVHKLV6ZLWFK

 ,Q SDUWLFXODU 1LQWHQGR¶V VWDWHPHQWV UHJDUGLQJ WKH YHUVDWLOLW\ RI WKH -R\&RQV LQIOXHQFHG KLV

 SXUFKDVLQJGHFLVLRQ

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 23 of 101


  :LWKLQPRQWKVRIHDFKSXUFKDVHWKHMR\VWLFNRQERWKRI0U2UHQ¶V-R\&RQV

 EHJDQWRUHJLVWHUPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU³GULIW´

  ,Q $SULO RI  0U 2UHQ VHQW WKH -R\&RQ WKDW FDPH ZLWK WKH FRQVROH LQ WR

 1LQWHQGRIRUDQRXWRIZDUUDQW\UHSDLU+HKDGWRSD\IRUWKHUHSDLULQFOXVLYHRIVKLSSLQJ

 EHFDXVH WKH -R\&RQ ZDV GHHPHG RXWVLGH WKH PRQWK ZDUUDQW\ RQ DFFHVVRULHV 7ZR PRQWKV

 DIWHUUHFHLYLQJWKHUHSDLUHG-R\&RQEDFNWKHMR\VWLFNEHJDQWRH[KLELWWKHVDPHGULIWLQJLVVXH

 DJDLQ

  %HFDXVH 0U 2UHQ¶V -R\&RQV ZHUH UHQGHUHG XQXVDEOH DQG WKH UHSDLU SURFHVV

 SURYHG XQVXFFHVVIXO 0U 2UHQ SXUFKDVHG D 3UR FRQWUROOHU IURP $PD]RQ IRU  RQ

 'HFHPEHULQRUGHUWREHDEOHWRSOD\PRUHFRPSHWLWLYHJDPHV7KHUHSDLUHG-R\&RQ

 VWLOOH[KLELWVGULIWLQJ0U2UHQUHWDLQVERWKXQXVDEOH-R\&RQFRQWUROOHUV

  $WWKHWLPH0U2UHQSXUFKDVHGKLV6ZLWFKDQGVHFRQG-R\&RQFRQWUROOHU0U

 2UHQGLGQRWNQRZDERXWWKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHWKH'ULIW'HIHFWWRKLP+DG

 0U 2UHQ NQRZQ DERXW WKH GHIHFW KH ZRXOG QRW KDYH SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO

 FRQWUROOHURUKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 1DWKDQ$LQVZRUWK

  3ODLQWLII1DWKDQ$LQVZRUWKLVDFLWL]HQRIWKHVWDWHRI0LFKLJDQ

  0U $LQVZRUWK SXUFKDVHG D 1LQWHQGR 6ZLWFK FRQVROH LQ 0DUFK  IURP D

 *DPH6WRSLQ$QQ$UERU0LFKLJDQIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH3ULRUWRSXUFKDVLQJ

 WKH6ZLWFK0U$LQVZRUWKZDWFKHGSRUWLRQVRIWKH/DXQFK(YHQW

  $ERXWRQHPRQWKODWHULQ$SULO0U$LQVZRUWKSXUFKDVHGDVHFRQG-R\&RQ

 FRQWUROOHUIRUDSSUR[LPDWHO\IURPD:DOPDUWLQ$QQ$UERU0LFKLJDQ



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 24 of 101


  $URXQG $XJXVW RU 6HSWHPEHU  WKH MR\VWLFN RQ ERWK -R\&RQV VWDUWHG

 UHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\

 &RQVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  2Q 1RYHPEHU   0U $LQVZRUWK FDOOHG 1LQWHQGR UHJDUGLQJ WKH -R\&RQ

 WKDWFDPHZLWKWKHFRQVROHZKLFKZDVVWLOOXQGHUZDUUDQW\DWWKHWLPH0U$LQVZRUWKVHQWWKH

 FRQWUROOHU LQ IRU UHSDLU 7KH UHSDLU SURFHVV WRRN  ZHHNV $ IHZ ZHHNV DIWHU UHFHLYLQJ WKH

 UHSDLUHG -R\&RQEDFNWKHGULIWLQJVWDUWHGDJDLQ0U$LQVZRUWK GLG QRW VHQG KLVVHFRQG-R\

 &RQ LQ IRU UHSDLU EHFDXVH LW ZDV RXWVLGH WKH ZDUUDQW\ %RWK RI 0U $LQVZRUWK¶V -R\&RQV

 FRQWLQXH WR H[KLELW WKH GULIWLQJ LVVXH 0U $LQVZRUWK KDG WR EX\ D 3UR FRQWUROOHU IRU

 DSSUR[LPDWHO\

  $WWKHWLPH0U$LQVZRUWKSXUFKDVHGKLV6ZLWFKDQGVHFRQG-R\&RQFRQWUROOHU

 KH GLG QRW NQRZ DERXW WKH GHIHFW DQG 1LQWHQGR GLG QRW GLVFORVH WKH GHIHFW WR KLP +DG 0U

 $LQVZRUWKNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYHSXUFKDVHGKLV6ZLWFKRUDGGLWLRQDO

 FRQWUROOHUVRUKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 -DVRQ&RIIH\:ROIJDQJ

  -DVRQ&RIIH\:ROIJDQJLVDFLWL]HQRIWKHVWDWHRI2UHJRQ

  0U &RIIH\:ROIJDQJ SXUFKDVHG D 1LQWHQGR 6ZLWFK IURP *DPH6WRS RQ RU

 DURXQG0DUFKIRUDSSUR[LPDWHO\IRUSHUVRQDOIDPLO\RUKRXVHKROGXVH3ULRU

 WRSXUFKDVLQJKLV6ZLWFK0U&RIIH\:ROIJDQJYLHZHGWKHHQWLUH/DXQFK(YHQW

  $IWHUDERXWDPRQWKRIQRUPDOXVHWKHMR\VWLFNRQWKH-R\&RQWKDWFDPHZLWK

 0U &RIIH\:ROIJDQJ¶V FRQVROH VWDUWHG UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\

 FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 25 of 101


  0U&RIIH\:ROIJDQJFRQWDFWHG1LQWHQGRLQRUDURXQG$SULODQG1LQWHQGR

 KDGKLPVHQGWKH-R\&RQLQIRUDQLQZDUUDQW\UHSDLU0U&RIIH\:ROIJDQJKDGWRSD\

 RXWRISRFNHW IRU VKLSSLQJ 7KH UHSDLU SURFHVV WRRN D FRXSOH RI ZHHNV :LWKLQ  ZHHNV RI

 UHFHLYLQJ WKH UHSDLUHG -R\&RQ EDFN WKH MR\VWLFN VWDUWHG H[KLELWLQJ WKH VDPH GULIWLQJ LVVXH

 DJDLQLIQRWZRUVHWKDQEHIRUHEHLQJUHSDLUHG

  0U &RIIH\:ROIJDQJ SXUFKDVHG D UHSODFHPHQW VHW RI -R\&RQV IRU

 DSSUR[LPDWHO\  LQ RU DURXQG -XQH  $JDLQ DIWHU DERXW D PRQWK RI QRUPDO XVH WKH

 UHSODFHPHQWVHWRI-R\&RQVEHJDQWRH[KLELWWKHGULIWLQJLVVXH

  0U &RIIH\:ROIJDQJ DJDLQ FRQWDFWHG 1LQWHQGR ZKR KDG KLP VHQG WKH VHFRQG

 -R\&RQLQIRUDQLQZDUUDQW\UHSDLU0U&RIIH\:ROIJDQJDJDLQKDGWRSD\IRUVKLSSLQJFRVWV

 RXWRISRFNHW 7KH UHSDLU SURFHVV WRRN DQRWKHU FRXSOH ZHHNV $ERXW D PRQWK DIWHU UHFHLYLQJ

 ZKDW DSSHDUHG WR EH D UHIXUELVKHG -R\&RQ WKH MR\VWLFN VWDUWHG H[KLELWLQJ WKH GULIWLQJ LVVXH

 DJDLQ

  0U &RIIH\:ROIJDQJ SXUFKDVHG DQRWKHU UHSODFHPHQW VHW RI -R\&RQV IRU

 DSSUR[LPDWHO\LQRUDURXQG-DQXDU\$JDLQDIWHUDERXWDPRQWKRIQRUPDOXVHWKH

 UHSODFHPHQWVHWRI-R\&RQVEHJDQWRH[KLELWWKHGULIWLQJLVVXH%HFDXVHWKHUHSDLUSURFHVVKDG

 SURYHQ XQVXFFHVVIXO 0U &RIIH\:ROIJDQJQRORQJHURSWHGWRVHQG WKH -R\&RQ LQ IRU UHSDLU

 0U &RIIH\:ROIJDQJ LQVWHDG SXUFKDVHG DQRWKHU UHSODFHPHQW -R\&RQ LQ RU DURXQG -DQXDU\

 $JDLQDIWHUDERXWDPRQWKRIQRUPDOXVHWKHUHSODFHPHQW-R\&RQVWDUWHGWRH[KLELWWKH

 GULIW LVVXH 0U &RIIH\:ROIJDQJ QRZ RQO\ XVHV D 3UR FRQWUROOHU ZKLFK KH SXUFKDVHG IRU

 DSSUR[LPDWHO\

  0U&RIIH\:ROIJDQJFXUUHQWO\UHWDLQVWZRVHWVRIXQXVDEOH-R\&RQFRQWUROOHUV



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 26 of 101


  $WWKHWLPH0U&RIIH\:ROIJDQJSXUFKDVHGKLV6ZLWFKKHGLGQRWNQRZDERXW

 WKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHWKHGHIHFWWRKLP+DG0U&RIIH\:ROIJDQJNQRZQ

 DERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYHSXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRUKH

 ZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG

 (ULF:LOVRQ

  (ULF:LOVRQLVDFLWL]HQRIWKHVWDWHRI2KLR

  0U :LOVRQ SXUFKDVHG D 1LQWHQGR 6ZLWFK FRQVROH IURP :DOPDUW LQ 1RYHPEHU

 IRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  $ERXWQLQHPRQWKVDIWHUSXUFKDVLQJWKHFRQVROHLQ-XO\WKHOHIWMR\VWLFNRQ

 WKH -R\&RQ FRQWUROOHU VWDUWHG UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\ FRQWUROOHG RU

 ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  0U :LOVRQ FDOOHG 1LQWHQGR WZLFH LQ $XJXVW  (DFK WLPH WKH 1LQWHQGR

 UHSUHVHQWDWLYH KDG 0U :LOVRQ UHFDOLEUDWH WKH -R\&RQ FRQWUROOHU 7KLV GLG QRW FRUUHFW WKH

 GULIWLQJLVVXHHYHQDIWHUDFRXSOHGR]HQDWWHPSWV

  0U:LOVRQDJDLQFDOOHG1LQWHQGRWROHWWKHPNQRZWKDWLWVVXJJHVWHGIL[ZDVQRW

 UHVROYLQJWKHGULIWLQJLVVXH1LQWHQGRKDG0U:LOVRQVHQGWKH-R\&RQFRQWUROOHULQIRUDQLQ

 ZDUUDQW\UHSDLU

  $FRXSOHRIPRQWKVDIWHUUHFHLYLQJWKHUHSDLUHG-R\&RQEDFNWKHGULIWLQJVWDUWHG

 DJDLQ0U:LOVRQUHWDLQVWKHGHIHFWLYH-R\&RQZKLFKFRQWLQXHVWRH[KLELWWKH'ULIW'HIHFW

  0U :LOVRQ FRQVLGHUHG SXUFKDVLQJ D QHZ -R\&RQ FRQWUROOHU EXW WKH\ DUH WRR

 H[SHQVLYH

  +DG0U:LOVRQNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYHSXUFKDVHGKLV

 6ZLWFKRUKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRULWWKDQKHGLG

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 27 of 101


 /\GLD'H/RDFK

  /\GLD'H/RDFKLVDFLWL]HQRIWKHVWDWHRI:DVKLQJWRQ

  2Q 0DUFK   0V 'H/RDFK RUGHUHG D 1LQWHQGR 6ZLWFK FRQVROH IRU

  IRU SHUVRQDO IDPLO\ RU KRXVHKROG XVH DV ZHOO DV D WZR \HDU VHUYLFH SODQ IRU 

 IURP )LQJHUKXW 7KH FRQVROH VKLSSHG RQ 0DUFK    0V 'H/RDFK SDLG  IRU

 VKLSSLQJ3ULRUWRSXUFKDVLQJWKH6ZLWFK0V'H/RDFKYLHZHGWKH/DXQFK(YHQW

  :LWKLQ ZHHNV RI SXUFKDVLQJ WKH FRQVROH WKH OHIW MR\VWLFN RQ WKH -R\&RQ

 FRQWUROOHU VWDUWHG UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\ FRQWUROOHG RU ³GULIWLQJ´ 7KLV

 UHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\

  2Q RU DURXQG 1RYHPEHU0V'H/RDFKFRQWDFWHG1LQWHQGRVXSSRUW DERXW

 WKH³GULIW´LVVXH7KH\RIIHUHGWRUHSDLUWKH-R\&RQFRQWUROOHUEXWVDLGWKHSURFHVVFRXOGWDNH

 IRXUZHHNV

  6LQFH WKDW FRQWUROOHU SDLU ZDV WKH RQO\ RQH 0V 'H/RDFK RZQHG VKH HQGHG XS

 SXUFKDVLQJRQHDGGLWLRQDOSDLURI-R\&RQFRQWUROOHUVIRUDSSUR[LPDWHO\DORQJZLWKWZR3UR

 FRQWUROOHUV DQG WZR RWKHU QRQEUDQG ZLUHOHVV FRQWUROOHUV FRPSDWLEOH ZLWK WKH 6ZLWFK

 $GGLWLRQDOO\VKHSXUFKDVHGDVHFRQG6ZLWFKIURPDQDFTXDLQWDQFHIRUDSSUR[LPDWHO\WKDW

 FDPHZLWKDSDLURI-R\&RQFRQWUROOHUV(YHQWXDOO\DOOWKUHHRIKHU-R\&RQFRQWUROOHUVEHJDQ

 H[SHULHQFLQJWKH³GULIW´LVVXH

  0V'H/RDFKFXUUHQWO\UHWDLQVWKUHHVHWVRIXQXVDEOH-R\&RQFRQWUROOHUV

  $W WKH WLPH 0V 'H/RDFK SXUFKDVHG KHU 1LQWHQGR 6ZLWFK FRQVROH VKH GLG QRW

 NQRZ DERXW WKH GHIHFW DQG 1LQWHQGR GLG QRW GLVFORVH WKH GHIHFW WR KHU  +DG 0V 'H/RDFK

 NQRZQDERXWWKHGHIHFWVKHZRXOGQRWKDYHSXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRU

 VKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRULW

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 28 of 101


 'HIHQGDQW

  'HIHQGDQW1LQWHQGRRI$PHULFD,QFLVLQFRUSRUDWHGLQ:DVKLQJWRQ6WDWHDQG

 PDLQWDLQVLWVSULQFLSDOSODFHRIEXVLQHVVDWWK$YH1(5HGPRQG:$

 )$&78$/$//(*$7,216

 $ 6ZLWFK&RQVROH-R\&RQV

  7KH6ZLWFKLVDYLGHRJDPLQJV\VWHPDQGFRQVROHWKDWZDVLQLWLDOO\UHOHDVHGE\

 1LQWHQGRLQ0DUFK,WLVDK\EULGFRQVROHJDPHUVFDQDWWDFKWKHUHPRYDEOH-R\&RQVDQG

 SOD\ WKH 6ZLWFK DV D SRUWDEOH KDQGKHOG JDPLQJ V\VWHP VLPLODU WR WKH SRSXODU *DPH %R\ RU

 *DPH*HDU RUWKH\FDQGRFNWKH6ZLWFKLQDGRFNLQJVWDWLRQDQGSOD\WKH6ZLWFKRQDWHOHYLVLRQ

 VFUHHQOLNHDWUDGLWLRQDOJDPLQJFRQVROH HJ3OD\6WDWLRQRU;ER[ 

  7KH-R\&RQFRQWUROOHUVDUHZLUHOHVV±JDPHUVXVHDULJKWDOHIW-R\&RQZKLFK

 FDQ HLWKHU EH FRQQHFWHG WR WKH 6ZLWFK VFUHHQ IRU SRUWDEOH KDQGKHOG SOD\ FRQQHFWHG WR D

 WUDGLWLRQDO JDPLQJ FRQWUROOHU DFFHVVRU\ RU XVHG DV WZR VHSDUDWH FRQWUROOHUV IRU WZR SOD\HU

 JDPHSOD\  7KH -R\&RQ FRQWUROOHUV DQG WKH GLIIHUHQW ZD\V WKH\ FDQ EH XVHG DUH GHSLFWHG LQ

 WKHVHLPDJHV

 

 

 

 

 

 

 

 

KWWSVZZZQLQWHQGRFRPVZLWFKV\VWHP ODVWYLVLWHG-XO\ 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 29 of 101


 

 

 

 

 

 

 

 

 

 

 

 7KHMR\VWLFNVDUHPDUNHGZLWKDUURZV







 

 

 








 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 30 of 101


 








 

 

 
  7KH-R\&RQVHDFKFRQWDLQDMR\VWLFNDQGVHYHUDOEXWWRQVWKDWDUHXVHGWRFRQWURO

 JDPHSOD\

  1LQWHQGR KHDYLO\ DGYHUWLVHG WKH YHUVDWLOLW\ DQG TXDOLW\ RI WKH -R\&RQV IRU

 JDPHSOD\DVDPDLQVHOOLQJSRLQWRIWKH6ZLWFKV\VWHP)RUH[DPSOHDWWKHOLYHVWUHDPHGODXQFK

 HYHQW ZKLFK PDQ\ RI WKH 3ODLQWLIIV ZDWFKHG  1LQWHQGR PDGH WKH IROORZLQJ UHSUHVHQWDWLRQV

 DERXWWKH-R\&RQV

 1LQWHQGR 6ZLWFK KDV LQKHULWHG '1$ IURP WKH PDQ\ 1LQWHQGR¶V HQWHUWDLQPHQW
V\VWHPV1LQWHQGRKDVUHOHDVHGWRGDWH
 
³1LQWHQGR6ZLWFKKDVEHHQGHVLJQHGDVDKRPHHQWHUWDLQPHQWJDPLQJFRQVROHWKDW
 JLYHV\RXWKHIUHHGRPWRFKDQJH\RXUSOD\VW\OH´

 ³+DQGLQJ D MR\FRQ WR D IULHQG RU IDPLO\ PHPEHU VKDULQJ WKH MR\ ULJKW WKHQ DQG
WKHUH
 
³(DFKMR\FRQKDVDQDQDORJVWLFNDQGHDFKVWLFNFDQEHSUHVVHGOLNHDEXWWRQ´
 
³(DFKMR\FRQFDQEHXVHGDVDIXOO\IXQFWLRQLQJLQGHSHQGHQWFRQWUROOHU´
 
³<RXFDQKDQGWKH-R\&RQWRWKHSHUVRQQH[WWR\RXLQPDQ\WZRSOD\HUJDPHV
 ZHFDOOWKLVVKDULQJWKHMR\´




KWWSVZZZ\RXWXEHFRPZDWFK"Y -VL5<1LV ODVWYLVLWHG6HSW 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 31 of 101


 ³:KHQ \RX SOD\ ZLWK WKHVH -R\&RQWKH\ILWULJKWLQWKHSDOPRI\RXUKDQGMXVW
ULJKWIHHOYHU\QDWXUDO´
 
³7KRVH DPD]LQJ FRQWUROOHUV WKH MR\FRQ FRPELQH DOO JDPHSOD\ LQQRYDWLRQV WKDW
 1LQWHQGRLQYHQWHGDQGDGGVWRLW´
 $ QHZ 6ZLWFK UHWDLOV IRU DSSUR[LPDWHO\  DQG LQFOXGHV RQH -R\&RQ

FRQWUROOHUVHW OHIWDQGULJKWDVGHSLFWHGDERYH 

 $GGLWLRQDO -R\&RQV FDQ EH SXUFKDVHG IRU DSSUR[LPDWHO\  IRU D SDLU RU

DSSUR[LPDWHO\IRUDQLQGLYLGXDOOHIWRUULJKWFRQWUROOHU

 7KH -R\&RQ FRQWUROOHUV DUH GHIHFWLYH  6SHFLILFDOO\ WKH MR\VWLFNV RQ WKH -R\

&RQVVXIIHUIURPDGHIHFWWKDWUHVXOWVLQLW³GULIWLQJ´RQLWVRZQ7KLVDIIHFWVJDPHSOD\VXFKWKDW

WKHFKDUDFWHUVRUDFWLRQRQWKHVFUHHQPRYHDVLIWKHUHKDVEHHQVRPHPRYHPHQWRIWKHMR\VWLFN

E\DJDPHUHYHQWKRXJKWKHUHKDVQRW

 'ULIWLQJ VLJQLILFDQWO\ LQWHUIHUHV ZLWK JDPHSOD\ 6LQFH WKH HQWLUH SXUSRVH RI WKH

6ZLWFK LV WR SOD\ YLGHR JDPHV DQG WKH SXUSRVH RI WKH -R\&RQ VSHFLILFDOO\ LV WR FRQWURO WKH

JDPHSOD\LQWKRVHYLGHRJDPHVWKH'ULIW'HIHFWJRHVWRWKHGHYLFH¶VFHQWUDOIXQFWLRQDOLW\

 2Q 6HSWHPEHU   1LQWHQGR LQWURGXFHG WKH 6ZLWFK /LWH ZKLFK LV

1LQWHQGR¶VVPDOOHUSXUHO\KDQGKHOGYHUVLRQRIWKH6ZLWFKFRQVROH

 2QHRIWKHPRVWQRWDEOHGLIIHUHQFHVEHWZHHQWKHUHJXODU6ZLWFKDQGWKH6ZLWFK

/LWH LV WKDW WKH 6ZLWFK /LWH GRHV QRW KDYH UHPRYDEOH -R\&RQV  ,QVWHDG WKH FRQWUROOHUV DQG

MR\VWLFNVDUHEXLOWULJKWLQWRWKH6ZLWFKKDQGKHOGJDPLQJV\VWHP

 8QIRUWXQDWHO\ IRU FRQVXPHUV1LQWHQGRGLGQRWUHVROYHWKHMR\VWLFNDQGGULIWLQJ

LVVXHVSULRUWRODXQFKLQJLWVKDQGKHOG6ZLWFK/LWHV\VWHP

 (DUO\UHSRUWVDQGWHDUGRZQVLQGLFDWHWKDWWKH6ZLWFK/LWHLVSODJXHGE\GHIHFWLYH

FRQWURODQGMR\VWLFNV\VWHPV6HHKWWSVJL]PRGRFRPQHZYLGHRVVXJJHVWWKHQLQWHQGRVZLWFK

OLWHPLJKWKDYH ODVWDFFHVVHG6HSW 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 32 of 101


  7KLVLVSDUWLFXODUO\SUREOHPDWLFIRUSXUFKDVHUVRIWKH6ZLWFK/LWHEHFDXVHXQOLNH

 ZLWKWKHUHJXODU6ZLWFKWKHUHLVQRDELOLW\WRVLPSO\UHPRYHWKH-R\&RQVIURPWKH6ZLWFK/LWH

 FRQVROH²WKHFRQWUROOHUVDUHEXLOWLQWRWKHJDPLQJV\VWHP:KHQWKH6ZLWFK/LWH¶VMR\VWLFNVIDLO

 WKHZKROHV\VWHPIDLOV

  1LQWHQGR NQHZ RI WKH MR\VWLFN DQG FRQWURO LVVXHV ZLWK WKH UHJXODU 6ZLWFK DQG

 -R\&RQV \HW LW GLG QRW UHVROYH WKLV LVVXH DQG LQFOXGHG WKH VDPH GHIHFWLYH KDUGZDUH LQWR WKH

 6ZLWFK/LWHV\VWHPV

 % 7HFKQLFDO1DWXUHRIWKH'HIHFW

  7KHGHVLJQRIDQGVHOHFWLRQRIPDWHULDOVLQWKHMR\VWLFNDUHWKHFDXVHRIWKH'ULIW

 'HIHFW  7KH SLFWXUH EHORZ VKRZV WKH LQVLGH RI WKH -R\&RQ FDVH  7KH VLOYHU PHWDO VTXDUH

 FRQWDLQVWKHPHFKDQLVPIRUFRQWUROOLQJWKHMR\VWLFN

 

 

 

 

 

 

 

 

 

 7KH SLFWXUH EHORZ VKRZV WKH DFWXDO MR\VWLFN DQG WKH PHWDO FDVH FRQWDLQLQJ LWV LQWHULRU

 PHFKDQLVP



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 33 of 101


 

 

 

 

 

 

 

 



  :KHQWKHFDVHLVRSHQHGXSWKHEDVHRIWKHMR\VWLFNPHFKDQLVPFRQWDLQVWZRVHWV

 RIEUXVKHVWKDWPRYHLQWKH[DQG\GLUHFWLRQGHSHQGLQJXSRQLQSXWIURPWKHXVHU0RYHPHQWV

 RIWKHMR\VWLFNDUHWUDQVODWHGWKURXJKSRO\HWK\OHQHFRPSRQHQWVWRWKHEUXVKHV7KHEUXVKHVDUH

 PDGH RI FRDWHG VWHHO DQG DUH PRXQWHG LQ D SRO\HWK\OHQH FDUULHU  $ GLDJUDP RI WKH H[SRVHG

 XQGHUFDUULDJHRIWKHMR\VWLFNLVEHORZ

 

 

 

 

 

 

 

  7KHEUXVKHVPDNHGLUHFWFRQWDFWZLWKDFRQGXFWLYHSDGZKLFKOLHVRQDIOH[LEOH

 FLUFXLW  7KH IOH[LEOH FLUFXLW LV D FRQGXFWLYH SDWK PDGH RI PHWDO RQ D SRO\PHU WKDW WUDQVPLWV

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 34 of 101


 VLJQDOV LH WKH PRWLRQ RI WKH EUXVKHV  WR WKH PRWKHUERDUG DERXW WKH SK\VLFDO ORFDWLRQ DQG

 PRYHPHQW RI WKH MR\VWLFN 7KH EUXVKHV WUDYHO RYHU WKH SDG ZKLFK WUDQVODWHV WR FKDQJHV LQ WKH

 HOHFWULFDOVLJQDOVWKDWFRQWUROPRYHPHQWRQWKHSOD\LQJVFUHHQ7KHIOH[LEOHFLUFXLWFRQWDFWSDGV

 DQGEUXVKHVDUHGHSLFWHGEHORZ

 

 

 

 

 

 

 

 

 

 

 

 

 








 %DVHG RQ DQDO\VLV FRQGXFWHG E\ 3ODLQWLIIV¶ FRXQVHO DQG WKHLU H[SHUW WR GDWH LW

DSSHDUVWKDWDSULQFLSDOFDXVHRIWKHGULIWLQJIDLOXUHLVH[WHQVLYHZHDURQWKHSDGVXUIDFH$VWKH

VWHHOEUXVKHVPRYHEDFNDQGIRUWKWKH\UXEDZD\WKHVRIWFDUERQPDWHULDOWKDWPDNHVXSWKHSDG

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 35 of 101


 7KH UHPRYHG PDWHULDO FKDQJHV WKH HOHFWULFDO UHVLVWDQFH RI WKH SDGV DQG SRWHQWLDOO\ OHDGV WR

 GULIWLQJ7KHGLIIHUHQFHLQVXUIDFHKDUGQHVVEHWZHHQWKHVWHHOEUXVKDQGWKHFDUERQSDGOHDGVWR

 H[FHVVLYH ZHDU GHEULV WKDW FROOHFWV RQ WKH EUXVK WLSV  7KLV WUDQVIHUUHG GHEULV H[DFHUEDWHV WKH

 ZHDURIWKHSDG$OVRGXULQJQRUPDOPRWLRQRIWKHMR\VWLFNWKHVRIWSRO\HWK\OHQHSDUWVFUHDWH

 ZHDUGHEULVDVWKH\DUWLFXODWHDJDLQVWRQHDQRWKHU7KHVHSDUWLFOHVHQGXSRQWKHSDGDQGDFWDV

 DQDEUDVLYHFDXVLQJIXUWKHUZHDU

 

 

 

 

 

 

  7KHSLFWXUHVEHORZWDNHQRQDVFDQQLQJHOHFWURQPLFURVFRSHLOOXVWUDWHWKHGHEULV

 IURPWKHIOH[LEOHFLUFXLWWKDWDFFXPXODWHRQWKHEUXVKHVIURPQRUPDOXVHRIWKH-R\&RQV













 

  ([DPLQDWLRQ RI FRQWUROOHUV WKDW DUH H[KLELWLQJ VLJQLILFDWLRQ GULIWLQJ VKRZHG

 WUDQVIHUUHGZHDUGHEULVRQWKHEUXVKWLSV$OORIWKHIOH[LEOHFLUFXLWVKDGZHDUSDWWHUQVRQWKH

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 36 of 101


 SDGV7KHHQWLUHUDQJHRIPRWLRQRIWKHMR\VWLFNRQO\DOORZVWKHEUXVKWLSVDIHZPLOOLPHWHUVRI

 WUDYHO+HQFHWKHZHDUSDWWHUQRQWKHSDGVLVFRUUHVSRQGLQJO\VPDOO%HVLGHVWKHZHDURIWKH

 FDUERQ PDWHULDO VLJQLILFDQW DPRXQWV RI SRO\HWK\OHQH ZHUH DOVR SUHVHQW RQ WKH EUXVKHV  7KH

 VOLGLQJGLUHFWLRQLVOHIWWRULJKWDQGWKLVLPDJHLOOXVWUDWHVWKHVLJQLILFDQWDPRXQWVRIZHDUGHEULV

 SUHVHQW

 

 

 

 

 

 

 

 

 7KHIROORZLQJSLFWXUHVKRZVDQXSFORVHYLHZRIWKHZHDUPDUNVRQWKHIOH[LEOHFLUFXLW

 

 

 

 

 

 

 

  

  

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 37 of 101


 & &XVWRPHU&RPSODLQWV

  3ODLQWLIIV¶H[SHULHQFHVZLWKWKHGULIWLQJSKHQRPHQRQDUHE\QRPHDQVLVRODWHGRU

 RXWO\LQJRFFXUUHQFHV,QGHHGWKHLQWHUQHWLVUHSOHWHZLWKH[DPSOHVRIPHVVDJHERDUGVDQGRWKHU

 ZHEVLWHVZKHUHFRQVXPHUVKDYHFRPSODLQHGRIWKHH[DFWVDPH-R\&RQGHIHFW

  0DQ\FRQVXPHUVUHSRUWH[SHULHQFLQJGULIWRQPXOWLSOH-R\&RQFRQWUROOHUV

 LQFOXGLQJUHSODFHPHQWFRQWUROOHUVWKH\SXUFKDVHGVHSDUDWHO\IURPWKHLU6ZLWFKHV

  6FRUHVRI6ZLWFKRZQHUVKDYHSXEOLFO\FRPSODLQHGDERXWWKH-R\&RQGHIHFWDQG

 GULIW7KHIROORZLQJDUHVRPHRIWKHFRPSODLQWVVXEPLWWHGRQIRUXPVDQGVRFLDOPHGLDZHEVLWHV

 E\ 6ZLWFK RZQHUV ZKLFK XSRQ LQIRUPDWLRQ DQG EHOLHI DUHPRQLWRUHG E\ 1LQWHQGR   %HORZ LV

 MXVWDVDPSOLQJRIWKHPDQ\FRPSODLQWV

 &RPSODLQWVDERXWWKHRULJLQDO6ZLWFKV\VWHP

 'DQLHO'71LQWHQGR6XSSRUW)RUXPV

 ³,
PFXUUHQWO\KDYLQJSUREOHPVZLWKWKHOHIWMR\FRQDQDORJVWLFN:KHQHYHU,SRZHU
RQP\OHIWMR\FRQWKHFRQWUROOHUVWDUWVPRYLQJXSHYHQZKHQ,
PQRWWRXFKLQJ
 WKHDQDORJVWLFN´

 .LQJWDWD5HGGLW

 ³>0@\ RULJLQDO SDLU RI -R\&RQV VWDUWHG GULIWLQJ DERXW D \HDU DIWHU EX\LQJ LW DW
ODXQFK,KDYH\HDUZDUUDQW\VR,ZHQWDQGUHSODFHGWKHPPRQWKVODWHUDQGLW
 VWDUWHGKDSSHQLQJDJDLQ´

 

 

 

 7KHIROORZLQJFRPSODLQWVDUHUHSURGXFHGDVWKH\DSSHDURQOLQH$Q\W\SRJUDSKLFDOHUURUVDUH
DWWULEXWDEOHWRWKHRULJLQDODXWKRU
 KWWSVHQDPHULFDVVXSSRUWQLQWHQGRFRPDSSVRFLDOTXHVWLRQVGHWDLOTLGaOHIWMR\FRQ
DQDORJVWLFNGULIWLQJXSZDUGV ODVWYLVLWHG6HSW 
 
KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVTESOHIWBMR\FRQBDQDORJBVWLFNBGULIWLQ
J ODVWYLVLWHG6HSW 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 38 of 101


 &DQ\RQ:UQ5HGGLW

 ³,KDYHEHHQRQHRIWKHXQOXFN\LQGLYLGXDOVZKRKDVH[SHULHQFHGH[FHVVLYHORQJ
WHUPGULIWLVVXHVZLWKDOORIP\SDLUVRIMR\FRQV,RZQWKUHHSDLUVEHWZHHQWZR
 FRQVROHV,KDYHKDGWRVHQGMR\FRQVLQIRUUHSDLUGXHWRGULIWLQJeightWLPHV²
VRPHWLPHVREYLRXVO\PXOWLSOHWLPHVSHUMR\FRQ´
 
6WHOWHU*DPH)$4V0HVVDJH%RDUG

³>,@KDYHWZROHIWMR\FRQVDQGWKHDQDORJVWLFNGULIWVRQERWKRIWKHP2QHGULIWV
 OHIWDQGWKHRWKHUGULIWVXS%DVLFDOO\LQSXWUHJLVWHUVZLWKRXWPHWRXFKLQJWKHVWLFN
7KLV KDSSHQV DWWDFKHG DQG XQDWWDFKHG,¶P QRW VXUH LI LW¶V P\ 6ZLWFK RU WKH
 MR\FRQV´

 WUXWKIXOO\FRUQFRE5HGGLW

 ³>,@ KDYH WZR VHWV WKDW DUH D \HDU DQG D KDOI ROG DQG DUH ERWK VWDUWLQJ WR GULIW
EDG´
 
-RVK6WDFN([FKDQJH

 ³$ERXW  ZHHNV DJR, QRWLFHG WKDW WKH OHIW DQDORJ VWLFN RQ P\1LQWHQGR 6ZLWFK
 -R\&RQV VWDUWHG GULIWLQJ WKDW LV ZLWKRXW WRXFKLQJ WKH VWLFN ZKHQ LW ZDV
FHQWHUHG  LW ZRXOG UHJLVWHU DV RIIFHQWHU FDXVLQJ FKDUDFWHUV LQ JDPHV WR VWDUW
 UDQGRPO\ ZDONLQJ LQ YDULRXV GLUHFWLRQV IUHTXHQWO\ GRZQZDUG 7KLV REYLRXVO\
PDNHVSOD\LQJJDPHVUDWKHUGLIILFXOW´
 
&\EHU6DL,*1%RDUGV

³0\OHIWMR\FRQKDVDGULIWLQJFRQWUROVWLFNWKDWFRQVWDQWO\PDNHVP\FKDUDFWHU
 PRYH LQ DQ\ JDPH ZKHQ ,
P WU\LQJ WR VWDQG VWLOO RU ZKHQ , WU\ WR PRYH LQ
DQRWKHUGLUHFWLRQLWIHHOVOLNHDVWUXJJOH2EYLRXVO\WKLVLVPDNLQJSOD\LQJDORWRI
 JDPHVXQSOD\DEOHDQG,GRQ
WIHHOOLNHEX\LQJDOOQHZMR\FRQVIRU+RZGR\RX
UHSDLULWRQ\RXURZQZLWKRXWVHQGLQJLWLQWR1LQWHQGR"´



 KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVSKWZHBUHDOO\BVKRXOGQWBGLVFRXQWBS
HRSOHBH[SHULHQFLQJ ODVWYLVLWHG6HSW 

 KWWSVJDPHIDTVJDPHVSRWFRPERDUGVQLQWHQGRVZLWFK ODVWYLVLWHG6HSW
 

 KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVDWPMR\BFRQVBGULIWLQJ ODVWYLVLWHG
6HSW 
 KWWSVJDPLQJVWDFNH[FKDQJHFRPTXHVWLRQVZK\DUHWKHDQDORJVWLFNVRQP\
QLQWHQGRVZLWFKFRQWUROOHUVDOOVWDUWLQJWRGULI ODVWYLVLWHG6HSW 
 
KWWSVZZZLJQFRPERDUGVWKUHDGVKRZWRIL[GULIWLQJFRQWUROVWLFNLQOHIW
MR\FRQ ODVWYLVLWHG6HSW 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 39 of 101


 /L]XND1LQWHQGR/LIH

 ³%RWKRIPLQHKDYHEHHQGULIWLQJIRUDORRRRQJWLPHQRZ7KHULJKWRQO\VOLJKWO\
VR IRU WKH ORQJHVW WLPH ZKLOH WKH OHIW JRW IODW RXW XQXVDEOH WKHQ , ERXJKW D
 UHSODFHPHQWDQGQRZWKHULJKWLVUDSLGO\JHWWLQJMXVWDVEDG´

 &KHIB%UDK5HGGLW

 ³(YHU\IULHQGRIPLQHDQGPHKDYHKDGGULIWLVVXHZLWKMR\FRQV,MXVWXVHSUR
FRQWUROOHUQRZ´
 
GUHZF5HGGLW

³>,@ERXJKWP\6ZLWFKDERXWPRQWKVDJR>,@QRWLFHGERWKVHWVRIP\MR\
 FRQV EHJLQ JLYLQJ PH SUREOHPV ZLWK GULIW RQ WKH OHIW FRQWUROOHU D FRXSOH
PRQWKV DJR DQG VR , VWDUWHG WR SD\ DWWHQWLRQ WR DOO WKH FRPSODLQWV ,W¶V DODUPLQJ
 WKDWWKLV LV D NQRZQ LVVXH RQ DQ  FRQWUROOHU DQG \HW 1LQWHQGR KDVQ¶W VDLG ERR
DERXW LW    >$@UH ZH H[SHFWHGWRWKURZ DZD\H[SHQVLYH FRQWUROOHUV DQG MXVW EX\
 QHZRQHVRUSD\1LQWHQGRWRIL[WKHLUPLVWDNHV"´
³+RZ KDYH WKHVH FRQWUROOHUV QRW EHHQ UHFDOOHG" ,W¶V REYLRXVO\ D GHVLJQ IODZ VR
 ZK\QRWIL[LW",DPJRLQJWRWU\DQGIL[WKHPP\VHOIZKLFK,¶YHVHHQZRUNEXWWKH
IDFWWKDWZHKDYHWRWU\WRGRWKDWLVULGLFXORXV>,@FDQ¶WSXVKGRZQDQ\PRUH
 DQGWKDWWKHGULIWKDVJRWWHQVREDGWKDWHYHQLQWKHPHQXHYHU\WKLQJMXVWJRHV
VWUDLJKWWRWKHWRS´
 
/XFN\*DPH)$4V
 
³>7@KH VZLWFK ZLOO EH P\ ODVW QLQWHQGR FRQVROH WKDQNV WR MR\FRQ GULIW    QHYHU
 KDYH >,@ VHHQ VXFK SRRUO\ GHVLJQHG FRQWUROOHUV     >,@ ZLOO KDYH WR EX\ P\WK
SDLURIMR\FRQVVRRQ>@>7@KRVHZLOOHQGXSGULIWLQJWRR>@WKH\DOZD\VGR´
 
LNRQLQR5HGGLW
 
³0\ULJKWMR\FRQLVGULIWLQJKDUGDQGLWVDQLJKWPDUHDQ\WLSVIRUIL[LQJLW"´



 KWWSZZZQLQWHQGROLIHFRPQHZVJXLGHBKRZBWRBIL[BDBGULIWLQJBQLQWHQGRBVZLWFKBM
R\FRQBDQDORJXHBVWLFN ODVWYLVLWHG6HSW 

 KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVE]]KRZBWRBIL[BFRQWUROOHUBGULIWBRQ
BWKHBVZLWFKBMR\FRQV ODVWYLVLWHG6HSW 

 KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVEEWKHBOHIWBMR\FRQBIDLOXUHBLVBDBWU
DYHVW\BWKDWBVKRXOG ODVWYLVLWHG6HSW 
 KWWSVJDPHIDTVJDPHVSRWFRPERDUGVQLQWHQGRVZLWFK ODVWYLVLWHG6HSW
 
 
KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVETWTP\BULJKWBMR\FRQBLVBGULIWLQJBKD
UGBDQGBLWVBD ODVWYLVLWHG6HSW 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 40 of 101


 5D]]\1LQWHQGR/LIH

 ³)RXU RI P\ ILYH MR\FRQV GHYHORSHG GULIWLQJ SUREOHPV RQH RQO\ D PRQWK DIWHU
SXUFKDVH´
 
LPRFWRSXVPDQ5HGGLW
 
³,KDYHMR\FRQVDQGRQO\OHIWRQHVGRQ¶WGULIW,W¶VULGLFXORXV+DGWREX\D
 SURFRQWUROOHUEHFDXVHRILW´

 &RPSODLQWVDERXWWKH6ZLWFK/LWH

 )URP%RNX1R%HDUGRQ

 ³#6SDZQ:DYH0HGLD VR , WKLQN , PD\ KDYH WKH ILUVW FDVH RI MR\FRQ GULIW LQ D
6ZLWFK/LWHDQGDOO,
YHGRQHLVPDUDWKRQHG/LQN
V$ZDNHQLQJ,ORYHWKLVFRQVROH
 VRPXFKEXWWKLVLVEXPPLQJPHRXW,VWKLVKRZMR\FRQGULIWPDQLIHVWV"2ULVWKLV
DQRWKHU OHVVZRUU\LQJ LVRODWHGGHIHFW"´

)URP$OH[LV-DYLHURQ

³GD\VDIWHUEX\LQJWKHVZLWFKOLWHWKHDQDORJVWLFNDUHDOUHDG\GULIWLQJVOLJKWZKHQ
 LPRYHP\MR\VWLFNWRWKHOHIW´
 )URP6DYY\RQ

 ³#1LQWHQGR$PHULFDMXVWJRWVZLWFKOLWHDQGLWKDVMR\FRQGULIWDIWHUGD\V,GRQ¶W
ZDQWWRH[FKDQJHDQGVHWXSDZKROHQHZRQHDJDLQWRGLVFRYHUWKHVDPHSUREOHP

6R IUXVWUDWLQJ$QG , NQRZ PDQ\ SHRSOH KDYHQ¶W H[SHULHQFHG LW EXW LW H[LVWV
 HYHU\ZKHUH´

 




 
KWWSZZZQLQWHQGROLIHFRPQHZVJXLGHBKRZBWRBIL[BDBGULIWLQJBQLQWHQGRBVZLWFKBM
R\FRQBDQDORJXHBVWLFN ODVWYLVLWHG6HSW 
 
KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVFF][Z]LBNQRZBLWVBEHHQBVDLGBDBELOOLR
QBWLPHVBEXWBQLQWHQGR"XWPBVRXUFH VKDUH XWPBPHGLXP LRVBDSS ODVWYLVLWHG6HSW 
 
KWWSVWZLWWHUFRP%RNX1R%HDUGVWDWXV ODVWYLVLWHG6HSWHPEHU
  

KWWSVZZZ\RXWXEHFRPZDWFK"Y GKJO;62&R ODVWYLVLWHG6HSWHPEHU 
 
KWWSVWZLWWHUFRP6DYY\=HUVWDWXV ODVWYLVLWHG6HSWHPEHU
 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 41 of 101


 )URP+HOOR&HOORRQ

 ³,EHDW/LQN¶V$ZDNHQLQJRYHUWKHZHHNHQGRQP\RULJLQDO6ZLWFK/LWHV\VWHP,
KDG RQO\ SXW OLNH  VRPHWKLQJ KRXUV RQ LW DQG LW VWDUWHG WR VKRZ MR\FRQ GULIW
 :K\ LV WKLV KDSSHQLQJ HDUOLHU RQ WKDQ ZLWK WKH HDUOLHU 6ZLWFK" $Q\RQH NQRZ"
7KDQNIXOO\P\ROGJDPHVWRSPDQDJHUKRRNHGPHXSZLWKDQHZRQH´

)URP+LJK)LYHRQ6HSWHPEHU

³, FDQ¶W EHOLHYH LW P\ 1LQWHQGR 6ZLWFK /LWH LV DOUHDG\ GULIWLQJ , ZDV SOD\LQJ
 %27:DQGWKHFDPHUDNHSWPRYLQJZLWKRXWWRXFKLQJWKHDQDORJXHVWLFN,WULHGWR
FDOLEUDWHDQGXSGDWHWKHFRQWUROOHUVEXWLWZDVVWLOOWKHVDPH/XFNLO\,DOUHDG\KDYH

DQ 2* 6ZLWFK WR IDOO EDFN RQ EXW ,¶P VR JXWWHG DQG XSVHW ,¶P JRLQJ WR JHW P\
 PRQH\EDFNILUVWWKLQJWRPRUURZDQGZDLWXQWLO&KULVWPDVWRVHHLI1LQWHQGRIL[HV
WKHLVVXHV´


  ' .QRZOHGJH

  1LQWHQGRLVDZDUHRIWKH-R\&RQGHIHFW,QWKHILUVWSODFHLWKDVUHFHLYHGGURYHV

 RIFRPSODLQWVIURPFRQVXPHUVDERXWWKLVLVVXHERWKGLUHFWO\IURPFRQVXPHUVDQGWKURXJKRQOLQH

 IRUXPVDQGVRFLDOPHGLDVLWHVWKDWLWPRQLWRUV

  1LQWHQGR FRQWUROV WKH PDQXIDFWXUH GHYHORSPHQW PDUNHWLQJ VDOHV DQG VXSSRUW

 IRUWKH6ZLWFKDQG-R\&RQFRQWUROOHUV$FFRUGLQJO\1LQWHQGRZDVUHVSRQVLEOHIRUSHUIRUPLQJ

 SUHUHOHDVH WHVWLQJ RQ WKH 6ZLWFK DQG -R\&RQ FRQWUROOHUV ZKLFK VKRXOG KDYH DOHUWHG LW WR WKH

 GHIHFW

  ,W KDV EHHQ UHSRUWHG WKDW DV RI 0DUFK   WKHUH KDYH EHHQ  PLOOLRQ

 6ZLWFK XQLWV VROG ZRUOGZLGH QRW HYHQ FRXQWLQJ DGGLWLRQDO -R\&RQV SXUFKDVHG VHSDUDWHO\ 

 


 KWWSVZZZUHGGLWFRPU6ZLWFKFRPPHQWVGUQLLBEHDWBOLQNVBDZDNHQLQJBRYHUBWKHBZHHNHQ
GBRQBP\ ODVWYLVLWHG6HSWHPEHU 
 KWWSVZZZUHGGLWFRPU6ZLWFKFRPPHQWVGEQIQLQWHQGRBVZLWFKBOLWHBGULIWLQJBRQBERWZ
ODVWYLVLWHG6HSWHPEHU 
 KWWSVYHQWXUHEHDWFRPVZLWFKVDOHVKLWPLOOLRQRQSDFHZLWKSOD\VWDWLRQ
 ODVWYLVLWHGRQ6HSW 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 42 of 101


 &OHDUO\ 1LQWHQGR ZRXOG QRW EH VHOOLQJ D SURGXFW ZLWK VXFK YROXPH ZLWKRXW ILUVW FRQGXFWLQJ

 H[WHQVLYH SUHVDOH WHVWV VXFK DV IDLOXUH DQDO\VLV VWUHVV WHVWV SUHVVXUH WHVWV DQG IULFWLRQ WHVWV 

 EHIRUHEULQJWKH6ZLWFKWRPDUNHW

  $V DOUHDG\ QRWHG 1LQWHQGR WRXWHG WKH -R\&RQ¶V GHVLJQ DV D SURGXFW RI PDQ\

 \HDUVRI1LQWHQGRLQQRYDWLRQVDWWKHODXQFKHYHQWIRUWKH6ZLWFK

  7KH6ZLWFKZDVILUVWUHOHDVHGLQ0DUFKDQGLVVWLOORQWKHPDUNHWWRGD\

  'HVSLWHNQRZLQJDERXWWKH-R\&RQGHIHFW1LQWHQGRFRQWLQXHVWRPDUNHWDQGVHOO

 WKH6ZLWFKDQG-R\&RQFRQWUROOHUV WKURXJKWKLUGSDUW\UHWDLOHUV ZLWKRXWGLVFORVLQJWKHGHIHFW

  5HFHQWO\1LQWHQGRDQQRXQFHGWKHUHOHDVHRIWKH-R\&RQVLQVHYHUDOQHZFRORUV

 VXFKDVSXUSOHDQGRUDQJH7KHUHLVQRLQGLFDWLRQWKDW1LQWHQGRUHGHVLJQHGRUIL[HGWKHGHIHFWLQ

 WKH-R\&RQVZKLOHLWZDVFRPLQJXSZLWKWKHVHQHZFRORURSWLRQV

  1LQWHQGR DOVR MXVW ODXQFKHG D QHZ YHUVLRQ RI WKH WUDGLWLRQDO 6ZLWFK YHUVLRQ 

 QRWWREHFRQIXVHGZLWKWKH6ZLWFK/LWH ZKLFKKDVDQH[WHQGHGEDWWHU\OLIH(DUO\UHSRUWVDQG

 WHDUGRZQVFRQGXFWHGE\EORJJHUVLQGLFDWHWKDWQRWKLQJKDVFKDQJHGZLWKUHVSHFWWRWKHGHVLJQ

 RIWKHGHIHFWLYH-R\&RQV

  3XUFKDVHUVRIWKHQHZYHUVLRQRIWKH6ZLWFKDUHVWDUWLQJWRSRVWRQOLQHFRPSODLQWV

 DERXWH[SHULHQFLQJWKHVDPHGULIWLVVXHV

 )URP-RVK*LOEHUWRQ

 ³1RWKLQJ DQQR\V PH PRUHWKDQJHWWLQJWKHYDQGP\ILUVWVHWRIMR\FRQVJHWWKH


GULIWLQJLVVXH´

 
 

See KWWSVZZZ\RXWXEHFRPZDWFK"Y SHSY4.K2 ODVWYLVLWHG6HSWHPEHU 
 KWWSVZZZLIL[LWFRP1HZVZHWRUHGRZQWKHQHZQLQWHQGRVZLWFKZKDWVGLIIHUHQW ODVW
YLVLWHG6HSWHPEHU 
 KWWSVZZZIDFHERRNFRPJURXSVWKHQLQWHQGRVZLWFKSHUPDOLQN ODVW
YLVLWHG6HSWHPEHU 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 43 of 101


 )URP7KRPDV%RXUQHDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU

 ³WKHFKDVQRWIL[HGMR\FRQGULIWLWKDSSHQVWRPH´ UHIHUULQJWRWKHPRGHOQXPEHU
RIWKHQHZHU-R\&RQV 

)URP$LU:UHFNHGDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU

³,¶YH ERXJKW WKH VZLWFK Y DERXW  ZHHNV DJR DQG WKH MR\ FRQV KDYH WKH QHZ
 XSGDWHGFODEHOLQJRQWKHPDQGWKHULJKWRQHVWDUWHGGULIWLQJRQO\ZHHNVLQWRLW´

 )URP'DUN'LDPRQGDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU

 ³,KDYHGULIWRQWKHROGDQGFPRGHO%XW,IL[HGLWRQDYLGHRRQP\FKDQQHO$QG
WKH\VWLOOZRUN´7LPH/DJ*DPLQJUHSOLHG³2KZHOOWKDW¶VJRRG7RREDGWRKHDU
 WKDWHYHQWKHQHZHURQHVGULIWWKRXJK´

 )URP-RVKXD0DUNDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU

 ³6DGO\,KDYHD&QHRQSLQNMR\FRQWKDWKDVVWDUWHGGULIWLQJ,DPDQQR\HGDV,
JRWWKHQHRQVHWWRUHSODFHP\RULJLQDOMR\FRQVDIWHURQHRIWKHPVWDUWHGGULIWLQJ
 WKDW ZDV D & MR\FRQ  6R \HDK LW ORRNV OLNH WKH\ KDYHQ
W IL[HG LW , DP DOVR
VXUSULVHGDWKRZOLWWOHWLPHLWWRRNWREHJLQGULIWLQJWKRXJKDV,KDYHRQO\KDGWKRVH

MR\FRQVIRUPD\EHPRQWKVPD\EHORQJHU,DPJXHVVLQJWKDWLWLVMXVWGXHWR
 PHDQGP\EURWKHUXVLQJWKHVZLWFKUHJXODUO\´

  1LQWHQGRFRXOGHDVLO\GLVFORVHWKHGHIHFWWRSRWHQWLDOFRQVXPHUVLQDQ\QXPEHU


 RIZD\VLQFOXGLQJRQWKHSURGXFW¶VSDFNDJLQJLQWKHXVHUPDQXDORQLWVZHEVLWHRURQLWVVHW

 XSVFUHHQ,WGRHVQRWGRVRDQGLQVWHDGFRQFHDOVWKHGHIHFWIURPFRQVXPHUV

  3ULRU WR WKH ILOLQJ RI WKLV ODZVXLW ZKHQ D FRQVXPHU H[SHULHQFHG WKH GHIHFW DQG
 FRQWDFWHG1LQWHQGR1LQWHQGRURXWLQHO\UHIXVHGWRRIIHUDQ\VRUWRIIL[IUHHRIFKDUJH





 

KWWSVZZZ\RXWXEHFRPZDWFK"Y W&DGT3/J ODVWYLVLWHG6HSWHPEHU 
 
KWWSVZZZ\RXWXEHFRPZDWFK"Y W&DGT3/J ODVWYLVLWHG6HSWHPEHU 

 KWWSVZZZ\RXWXEHFRPZDWFK"Y W&DGT3/J ODVWYLVLWHG6HSWHPEHU 

KWWSVZZZ\RXWXEHFRPZDWFK"Y W&DGT3/J ODVWYLVLWHG6HSWHPEHU 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 44 of 101


  )ROORZLQJWKHILOLQJRIWKLVODZVXLWOHDNHGGRFXPHQWVUHYHDOHGWKDW1LQWHQGRKDV

 EHJXQRIIHULQJIUHHUHSDLUVRQ-R\&RQVPDQLIHVWLQJWKHGHIHFW&RQVXPHUVPXVWPDLOWKHLU-R\

 &RQVWR1LQWHQGRDQGDUHW\SLFDOO\ZLWKRXWWKHLU-R\&RQIRUDSSUR[LPDWHO\DZHHNRUORQJHU

  7KHUHLVQRLQGLFDWLRQKRZHYHUWKDW1LQWHQGRKDVGHYHORSHGDQDFWXDOIL[IRUWKH

 GULIWSUREOHPUDWKHULWDSSHDUVWRVLPSO\SHUIRUPVRPHVRUWRIPLQRUUHIXUELVKPHQWDQGVHQG

 WKH -R\&RQV EDFN WR FRQVXPHUV VWLOO GHIHFWLYH DQG VXVFHSWLEOH WR PDQLIHVWDWLRQ RI WKH 'ULIW

 'HIHFW LQ WKH IXWXUH  1RU LV WKHUH DQ\ LQGLFDWLRQ WKDW 1LQWHQGR LV H[WHQGLQJ WKH ZDUUDQW\

 FRPSHQVDWLQJ FRQVXPHUV IRU YDULRXV SDVW H[SHQVHV RU GDPDJHV RU QRWLI\LQJ FRQVXPHUV DERXW

 WKHLUVHFUHWUHSDLUSURJUDP

  ,QGHHG SXEOLF FRPSODLQWV SRVWHG RQOLQH DOUHDG\ VKRZ VHYHUDO UHSRUWV RI

 FRQVXPHUV H[SHULHQFLQJ GULIW DJDLQ ZLWKLQ D IHZ GD\V RI UHFHLYLQJ WKHLU -R\&RQV EDFN IURP

 1LQWHQGR

 )URP&HVDURQ

 ³,JRWP\MR\FRQEDFNIURPUHSDLUWRGD\DQGJXHVVZKDWLWVWDUWHGWRGULIWრVRVHH
\RXLQFRXUW1 QWHQGR´

)URPHSRGVSRVWHG

³, VHQW P\ EURNHQ -R\&RQ EDFN WR 1LQWHQGR DQG WKH\ VHQW PH EDFN D QHZ SDLU
 $IWHUIRXUKRXUVRIOLJKWO\SOD\LQJKLGGHQJHP&HOHVWHP\QHZ-R\&RQDUHQRZ
GULIWLQJDJDLQ,FDQQRWEHOLHYHLW´







 KWWSVZZZYLFHFRPHQBXVDUWLFOH[]]YDLQWHUQDOQLQWHQGRPHPRLQVWUXFWVFXVWRPHU
VHUYLFHWRIL[MR\FRQGULIWIRUIUHH ODVWYLVLWHG$XJ 
 KWWSVWZLWWHUFRP3LQN0RRVWDFKHVWDWXV ODVWYLVLWHG$XJXVW
 
 
KWWSVZZZUHGGLWFRPUWRPRUURZFRPPHQWVFODNOFDQBFRQILUPBMR\FRQBDUHBVWLOOBGULIWLQJ

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 45 of 101


 )URP&KULV%XWOHUSRVWHG

 ³#1LQWHQGR$PHULFD LV WKLV ZKDW \RX FDOO D ³IL[HG´ MR\FRQ" , UHFHLYHG WKH UHSDLU
\HVWHUGD\DQGWKLVLVWKHUHVXOW,¶YHKDGWKHVZLWFKOHVVWKDQD\HDUDQG,¶YHKDG
 UHSDLUVGXULQJWKDWWLPHMR\FRQVDQGFKDUJHSRUW1RWWRPHQWLRQKDGWREX\D
UHSODFHPHQWFKDUJH%HEHWWHU´

)URP/XQGLQVWURPSRVWHG

³,
PVRJODGP\OHIW-R\FRQKDVGULIWDJDLQDERXWDPRQWKDIWHUVHQGLQJLWLQ6XFK
 IXQ6RIXQWREHSOD\LQJ6PDVKDQ\WKLQJDQGJHWSXOOHGWRWKHOHIWQRQVWRS,
PVR
WLUHGRI1LQWHQGR$VLQJOH-R\FRQLV´

)URP.H\EODGHGDUNRQ

³6HQWLQP\OHIWMR\FRQIRUGULIWUHSDLU*RWLWEDFN³IL[HG´

7RXJK WR VHH LQ WKH FRPPHQW DERYH EXW D YLGHR LV SRVWHG ZLWK WKLV 7ZHHW WKDW
 VKRZVRIIWKHMR\FRQGULIWRFFXUULQJRQWKHVXSSRVHGO\IL[HGFRQWUROOHU
 )URP&KHOOHGRJRRQ

 ³,VHQWRXWWZROHIWMR\FRQVWR1LQWHQGRWRJHWWKHPUHSDLUHGIRUGULIWDQGUHFHQWO\
JRW WKHP EDFN +RZHYHU WKH OHIW FRQWURO VWLFNLV VWLOO GULIWLQJ GRZQZDUG ,V WKHUH
 VRPHWKLQJZURQJZLWKP\V\VWHP"7KHRGGWKLQJLV,UHDOO\RQO\VHHLWGRLQJWKLV
RQWKHPDLQPHQXDQGLWNLQGRIGRHVLWRQDQGRII´

)URP6RQQL%RLRQ

³)RU DQ\RQH ZKR LV H[SHULHQFLQJ GULIW ZLWK \RXU -R\FRQ IRU \RXU 6ZLWFK DQG
 DUHSODQQLQJWRVHQGLWIRUDUHSDLUMXVWDQ)<,,VHQWPLQHLQDQGJRWLWEDFNODVW
 :HGQHVGD\ 7KH\ JDYH PH EUDQG QHZ -R\FRQV 7ZR GD\V ODWHU LW ZDV GULIWLQJ
DJDLQ+RSH#1LQWHQGR$PHULFDLVDZDUH´



 KWWSVWZLWWHUFRP0DGULGLVWD&KULVVWDWXV ODVWYLVLWHG$XJXVW
 

 KWWSVWZLWWHUFRP/XQGLQVWURPVWDWXV ODVWYLVLWHG$XJXVW
 

 KWWSVWZLWWHUFRPNH\EODGHGDUNVWDWXV ODVWYLVLWHG$XJXVW
 
 
KWWSVZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVFXMOHIWBMR\BFRQBVWLOOBGULIWLQJBDIWHUBF
 RPLQJBEDFN ODVWYLVLWHG$XJXVW 

KWWSVWZLWWHUFRP6RQRI6R+VWDWXV ODVWYLVLWHG6HSWHPEHU 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 46 of 101


 )URP.HYLQ0F1HLORQ

 ³LVHQWP\MR\FRQLQWRQLQWHQGRWRJHWIL[HGLJRWLWEDFNDQGLWVWLOOKDVWKHVDPH
SUREOHPDQGWKH\GLGQWUHWXUQP\]HOGDDQDORJVWLFNFRYHUDQ\RQHHOVHGHDOZLWK
 WKDW"ZKDWGLG\RXGR"´
  6RPH XVHUV DOVR UHSRUW EHLQJ FKDUJHG  IRU WKH UHSDLU  2WKHU XVHUV UHSRUW

 KDYLQJ WR ZDLW VHYHUDO ZHHNV ZLWKRXW WKHLU FRQWUROOHUV ZLWK QR XSGDWH IURP 1LQWHQGR DIWHU

 VHQGLQJWKHPLQIRUUHSDLU

  %HFDXVHRI1LQWHQGR¶VDFWLRQV6ZLWFKRZQHUVKDYHVXIIHUHGGDPDJHVLQWKHIRUP

 RIORVVRIXVHIDLOXUHRIWKH6ZLWFKHVDQG-R\&RQVFRUHIXQFWLRQDOLW\ORVVRIWKHEHQHILWRIWKHLU

 EDUJDLQGLPLQXWLRQRIYDOXHRIDQGRYHUSD\PHQWIRUWKHLU6ZLWFKHVDQGORVWWLPHDQGH[SHQVH

 LQYROYHG LQ FRQWDFWLQJ 1LQWHQGR DQG UHWDLOHUV DERXW WKH SUREOHP DQG ZDLWLQJ IRU UHSODFHPHQWV

 DQGRUUHSDLUV

  1LQWHQGR NQHZ RI WKH MR\VWLFN DQG FRQWURO LVVXHV ZLWK WKH UHJXODU 6ZLWFK DQG

 -R\&RQV \HW LW GLG QRW UHVROYH WKLV LVVXH DQG LQFOXGHG WKH VDPH GHIHFWLYH KDUGZDUH LQWR WKH

 6ZLWFK/LWHV\VWHPV

  %DVHG XSRQ WKH DOOHJDWLRQV LQ WKLV ODZVXLW DQG VFRUHV RI LQWHUQHW FRPSODLQWV

 RQOLQHSULRUWRWKHUHOHDVHRIWKH6ZLWFK/LWHDQGEHFDXVH1LQWHQGRLQFOXGHGWKHVDPHMR\VWLFN

 DQGFRQWUROOHUWHFKQRORJ\DQGKDUGZDUHLQWKH6ZLWFK/LWH1LQWHQGRFDQQRWGLVSXWHWKDWLWKDG

 SUHVDOHNQRZOHGJHRIWKH'ULIWLQJ'HIHFWLQWKH6ZLWFK/LWHV

 &/$66$&7,21$//(*$7,216

  7KLVDFWLRQLVEURXJKWDQGPD\SURSHUO\SURFHHGDVDFODVVDFWLRQSXUVXDQWWR

 5XOH D DQG E  DQG E  RIWKH)HGHUDO5XOHVRI&LYLO3URFHGXUH

  

 KWWSVZZZIDFHERRNFRPJURXSVWKHQLQWHQGRVZLWFKSHUPDOLQN ODVW
YLVLWHG6HSWHPEHU 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 47 of 101


  3ODLQWLIIVVHHNVFHUWLILFDWLRQRID&ODVVGHILQHGDVIROORZV ³1DWLRQZLGH&ODVV´ 

 1DWLRQZLGH&ODVV
$OO SHUVRQV LQ WKH 8QLWHG 6WDWHV ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 $QGRU

  ,QWKHDOWHUQDWLYH3ODLQWLIIVVHHNFHUWLILFDWLRQRIWKHIROORZLQJVXEFODVVHV ³6WDWH

 6XEFODVVHV´ 

 &DOLIRUQLD6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI&DOLIRUQLDZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 )ORULGD6XEFODVV
$OO SHUVRQVLQ WKH VWDWHRI)ORULGDZKRERXJKWD1LQWHQGR6ZLWFK VWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 1HZ-HUVH\6XEFODVV
$OO SHUVRQV LQ WKH VWDWH RI 1HZ -HUVH\ ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQG
 DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 1RUWK&DUROLQD6XEFODVV
$OO SHUVRQV LQ WKH VWDWH RI 1RUWK &DUROLQD ZKR ERXJKW D 1LQWHQGR 6ZLWFK RU
 VWDQGDORQH-R\&RQFRQWUROOHUV

 ,OOLQRLV6XEFODVV
$OO SHUVRQV LQ WKH VWDWHRI ,OOLQRLV ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 :DVKLQJWRQ6XEFODVV
$OO SHUVRQV LQ WKH VWDWH RI :DVKLQJWRQ ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQG
 DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 0DVVDFKXVHWWV6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI0DVVDFKXVHWWVZKRERXJKWD1LQWHQGR6ZLWFKVWDQG
 DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 $UL]RQD6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI$UL]RQDZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 


7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 48 of 101


 ,GDKR6XEFODVV
$OO SHUVRQV LQ WKH VWDWH RI ,GDKR ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 2NODKRPD6XEFODVV
$OO SHUVRQV LQ WKH VWDWH RI 2NODKRPD ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQG
 DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 0LFKLJDQ6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI0LFKLJDQZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 2UHJRQ6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI2UHJRQZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 1HZ<RUN6XEFODVV
$OO SHUVRQV LQ WKH VWDWH RI 1HZ <RUN ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQG
 DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 $ODEDPD6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI$ODEDPDZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 2KLR6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI2KLRZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH-R\
 &RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

 1HEUDVND6XEFODVV
$OOSHUVRQVLQWKHVWDWHRI1HEUDVNDZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH
 -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH

  ([FOXGHG IURP WKH &ODVVHV LV 1LQWHQGR LWV DIILOLDWHV HPSOR\HHV RIILFHUV DQG

 GLUHFWRUVSHUVRQVRUHQWLWLHVWKDWSXUFKDVHG6ZLWFKHVRU-R\&RQFRQWUROOHUVIRUUHVDOHDQGWKH

 -XGJH V DVVLJQHGWRWKLVFDVH3ODLQWLIIVUHVHUYHWKHULJKWWRPRGLI\FKDQJHRUH[SDQGWKHFODVV

 GHILQLWLRQV LI GLVFRYHU\ DQGRU IXUWKHU LQYHVWLJDWLRQ UHYHDO WKDW WKH\ VKRXOG EH H[SDQGHG RU

 RWKHUZLVHPRGLILHG

  1XPHURVLW\  7KH &ODVV LV VR QXPHURXV WKDW MRLQGHU RI DOO PHPEHUV LV

 LPSUDFWLFDEOH  :KLOH WKH H[DFW QXPEHU DQG LGHQWLWLHV RI LQGLYLGXDO PHPEHUV RI WKH &ODVV LV

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 49 of 101


 XQNQRZQDWWKLVWLPHVXFKLQIRUPDWLRQEHLQJLQWKHVROHSRVVHVVLRQRI1LQWHQGRDQGREWDLQDEOH

 E\3ODLQWLIIVRQO\WKURXJKWKHGLVFRYHU\SURFHVV3ODLQWLIIVEHOLHYHDQGRQWKDWEDVLVDOOHJHWKDW

 DWOHDVWKXQGUHGVRIWKRXVDQGVRI6ZLWFKHVDQG-R\&RQFRQWUROOHUVKDYHEHHQVROGQDWLRQZLGH

 1LQWHQGRKDVUHFHQWO\VWDWHGLQDQRWKHUPDWWHUWKDWLWKDVVROGRYHUPLOOLRQ6ZLWFKXQLWV³LQ

 WKH$PHULFDV´VLQFHLWZDVODXQFKHGLQ0DUFKRISee Vergara v. Nintendo of Am. Inc., No.

 FY DW (&) 1R  'HFODUDWLRQ RI 6HQLRU &RUSRUDWH &RXQVHO RI 1LQWHQGR

 .ULVWRSKHU.LHO 

  ([LVWHQFH3UHGRPLQDQFH RI &RPPRQ 4XHVWLRQV RI )DFW DQG /DZ &RPPRQ

 TXHVWLRQV RI ODZ DQG IDFW H[LVW DV WR DOO PHPEHUV RI WKH &ODVV  7KHVH TXHVWLRQV SUHGRPLQDWH

 RYHU WKH TXHVWLRQV DIIHFWLQJ LQGLYLGXDO &ODVV PHPEHUV  7KHVH FRPPRQ OHJDO DQG IDFWXDO

 TXHVWLRQVLQFOXGHEXWDUHQRWOLPLWHGWR

 D ZKHWKHU1LQWHQGRHQJDJHGLQWKHFRQGXFWDOOHJHGKHUHLQ

 E ZKHWKHUWKH-R\&RQFRQWUROOHUVDUHGHIHFWLYH

 F ZKHWKHU 1LQWHQGR SODFHG WKH 6ZLWFK DQG -R\&RQ FRQWUROOHUV LQWR WKH

 VWUHDPRIFRPPHUFHLQWKH8QLWHG6WDWHVZLWKNQRZOHGJHRIWKHGHIHFW

 G ZKHWKHU 1LQWHQGR NQHZRU VKRXOG KDYH NQRZQRI WKH GHIHFW DQG LI VR

 KRZORQJLWNQHZRIWKLVGHIHFW

 H ZKHQ1LQWHQGREHFDPHDZDUHRIWKHGHIHFW

 I ZKHWKHU 1LQWHQGR NQRZLQJO\ IDLOHG WR GLVFORVH WKH H[LVWHQFH DQG FDXVH

 RIWKHGHIHFW

 J ZKHWKHU1LQWHQGR¶VFRQGXFWDOOHJHGKHUHLQYLRODWHVFRQVXPHUSURWHFWLRQ

 VWDWXWHVIDOVHDGYHUWLVLQJODZVZDUUDQW\ODZVDQGRWKHUODZVDVDVVHUWHGKHUHLQ



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 50 of 101


 K ZKHWKHU3ODLQWLIIVDQG&ODVV0HPEHUVRYHUSDLGIRUWKHLU6ZLWFKHVDQGRU

 -R\&RQFRQWUROOHUVLQOLJKWRIWKHGHIHFW

 L ZKHWKHU 3ODLQWLIIV DQG &ODVV 0HPEHUV KDYH VXIIHUHG DQ DVFHUWDLQDEOH

 ORVVDVDUHVXOWRIWKHORVVRIWKHLU6ZLWFK¶VIXQFWLRQDOLW\

 M ZKHWKHU3ODLQWLIIVDQG&ODVV0HPEHUVDUHHQWLWOHGWRGDPDJHVLQFOXGLQJ

 SXQLWLYH GDPDJHV DV D UHVXOW RI 1LQWHQGR¶V FRQGXFW DOOHJHG KHUHLQ DQG LI VR WKH DPRXQW RU

 SURSHUPHDVXUHRIWKRVHGDPDJHVDQG

 N ZKHWKHU 3ODLQWLIIV DQG &ODVV 0HPEHUV DUH HQWLWOHG WR HTXLWDEOH UHOLHI

 LQFOXGLQJEXWQRWOLPLWHGWRUHVWLWXWLRQDQGRULQMXQFWLYHUHOLHILQFOXGLQJSXEOLFLQMXQFWLYHUHOLHI

 DVSURYLGHGIRUXQGHU&DOLIRUQLDODZDQGRWKHUVWDWHODZVDVVHUWHGKHUHLQ

  7\SLFDOLW\  3ODLQWLIIV¶ FODLPV DUH W\SLFDO RI WKH FODLPV RI WKH &ODVV VLQFH

 3ODLQWLIIV SXUFKDVHG D 6ZLWFK DQGRU -R\&RQ FRQWUROOHUV DV GLG HDFK PHPEHU RI WKH &ODVV

 3ODLQWLIIVDQG&ODVVPHPEHUVZHUHLQMXUHGLQWKHVDPHPDQQHUE\1LQWHQGR¶VXQLIRUPFRXUVHRI

 FRQGXFWDOOHJHGKHUHLQ3ODLQWLIIVDQGDOO&ODVVPHPEHUVKDYHWKHVDPHFODLPVDJDLQVW1LQWHQGR

 UHODWLQJWRWKHFRQGXFWDOOHJHGKHUHLQDQGWKHVDPHHYHQWVJLYLQJULVHWR3ODLQWLIIV¶FODLPVIRU

 UHOLHI DUH LGHQWLFDO WR WKRVH JLYLQJ ULVH WR WKH FODLPV RI DOO &ODVV 0HPEHUV  3ODLQWLIIV DQG DOO

 &ODVV PHPEHUV VXVWDLQHG PRQHWDU\ DQG HFRQRPLF LQMXULHV LQFOXGLQJ EXW QRW OLPLWHG WR

 DVFHUWDLQDEOHORVVHVDULVLQJRXWRI1LQWHQGR¶VZURQJIXOFRQGXFWLQVHOOLQJDQGIDLOLQJWRUHPHG\

 GHIHFWLYH -R\&RQ FRQWUROOHUV 3ODLQWLIIV DUH DGYDQFLQJ WKH VDPH FODLPV DQG OHJDO WKHRULHV RQ

 EHKDOIRIKLPVHOIDQGDOODEVHQW&ODVV0HPEHUV

  $GHTXDF\  3ODLQWLIIV DUH DGHTXDWH UHSUHVHQWDWLYHV IRU WKH &ODVV EHFDXVH KLV

 LQWHUHVWVGRQRWFRQIOLFWZLWKWKHLQWHUHVWVRIWKH&ODVVWKDWKHVHHNVWRUHSUHVHQW3ODLQWLIIVKDYH

 UHWDLQHGFRXQVHOFRPSHWHQWDQGKLJKO\H[SHULHQFHGLQFRPSOH[FODVVDFWLRQOLWLJDWLRQ²LQFOXGLQJ

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 51 of 101


 FRQVXPHU IUDXG FODVV DFWLRQ FDVHV²DQG WKH\ LQWHQG WR SURVHFXWH WKLV DFWLRQ YLJRURXVO\  7KH

 LQWHUHVWVRIWKH&ODVVZLOOEHIDLUO\DQGDGHTXDWHO\SURWHFWHGE\3ODLQWLIIVDQGWKHLUFRXQVHO

  6XSHULRULW\$FODVVDFWLRQLVVXSHULRUWRDOORWKHUDYDLODEOHPHDQVRIIDLUDQG

 HIILFLHQWDGMXGLFDWLRQRIWKHFODLPVRI3ODLQWLIIVDQGPHPEHUVRIWKH&ODVV7KHLQMXU\VXIIHUHG

 E\HDFKLQGLYLGXDO&ODVVPHPEHULVUHODWLYHO\VPDOOLQFRPSDULVRQWRWKHEXUGHQDQGH[SHQVHRI

 LQGLYLGXDO SURVHFXWLRQ RI WKH FRPSOH[ DQG H[WHQVLYH OLWLJDWLRQ QHFHVVLWDWHG E\ 1LQWHQGR¶V

 FRQGXFW ,W ZRXOG EH YLUWXDOO\ LPSRVVLEOH IRU PHPEHUV RI WKH &ODVV LQGLYLGXDOO\ WR UHGUHVV

 HIIHFWLYHO\ WKH ZURQJV GRQH WR WKHP E\ 1LQWHQGR (YHQ LI &ODVV PHPEHUV FRXOG DIIRUG VXFK

 LQGLYLGXDOOLWLJDWLRQWKHFRXUWV\VWHPFRXOGQRW,QGLYLGXDOL]HGOLWLJDWLRQSUHVHQWVDSRWHQWLDOIRU

 LQFRQVLVWHQW RU FRQWUDGLFWRU\ MXGJPHQWV ,QGLYLGXDOL]HG OLWLJDWLRQ LQFUHDVHV WKH GHOD\ DQG

 H[SHQVHWRDOOSDUWLHVDQGWRWKHFRXUWV\VWHPSUHVHQWHGE\WKHFRPSOH[OHJDODQGIDFWXDOLVVXHV

 RIWKHFDVH%\FRQWUDVWWKHFODVVDFWLRQGHYLFHSUHVHQWVIDUIHZHUPDQDJHPHQWGLIILFXOWLHVDQG

 SURYLGHV WKH EHQHILWV RI VLQJOH DGMXGLFDWLRQ DQ HFRQRP\ RI VFDOH DQG FRPSUHKHQVLYH

 VXSHUYLVLRQE\DVLQJOHFRXUW8SRQLQIRUPDWLRQDQGEHOLHIPHPEHUVRIWKH&ODVVFDQEHUHDGLO\

 LGHQWLILHGDQGQRWLILHG

  1LQWHQGR KDV DFWHG DQG UHIXVHV WR DFW RQ JURXQGV JHQHUDOO\ DSSOLFDEOH WR WKH

 &ODVVWKHUHE\PDNLQJDSSURSULDWHILQDOHTXLWDEOHDQGLQMXQFWLYHUHOLHIZLWKUHVSHFWWRWKH&ODVV

 DVDZKROH


&/$,06)255(/,()
 
&2817,
 %5($&+2)(;35(66:$55$17<
2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKH6WDWH6XEFODVVHV 
 
 3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 52 of 101


  1LQWHQGR LV D ³PHUFKDQW´ DV GHILQHG XQGHU WKH 8QLIRUP &RPPHUFLDO &RGH

 ³8&&´ 

  7KH6ZLWFKHVDQG-R\&RQFRQWUROOHUVDUH³JRRGV´DVGHILQHGXQGHUWKH8&&

  1LQWHQGRH[SUHVVO\ZDUUDQWHGWKDWWKH6ZLWFKHVDQG-R\&RQFRQWUROOHUVZHUHRI

 KLJK TXDOLW\ DQG DW D PLQLPXP ZRXOG DFWXDOO\ ZRUN SURSHUO\ DQG EH VXLWDEOH IRU JDPHSOD\

 1LQWHQGR VSHFLILFDOO\ ZDUUDQWHG DWWULEXWHV DQG JHQHUDO IXQFWLRQDOLW\ RI WKH 6ZLWFKHV DQG -R\

 &RQFRQWUROOHUV

  1LQWHQGRDOVRH[SUHVVO\ZDUUDQWHGWKDWLWZRXOGUHSDLUDQGRUUHSODFHGHIHFWVLQ

 PDWHULDO DQGRU ZRUNPDQVKLS IUHH RI FKDUJH WKDW RFFXUUHG GXULQJ WKH DSSOLFDEOH ZDUUDQW\

 SHULRGV

  1LQWHQGREUHDFKHGLWVZDUUDQWLHVE\VHOOLQJWR3ODLQWLIIVDQGWKH&ODVVPHPEHUV

 WKH6ZLWFKHVDQG-R\&RQFRQWUROOHUVZLWKDNQRZQGHIHFWDQGZKLFKDUHQRWRIKLJKTXDOLW\

 DQGDUHSUHGLVSRVHGWRIDLOSUHPDWXUHO\DQGRUIDLOWRIXQFWLRQSURSHUO\1LQWHQGRDOVREUHDFKHG

 LWVZDUUDQW\E\IDLOLQJWRSURYLGHDQDGHTXDWHUHSDLUZKHQFRQWDFWHGE\3ODLQWLIIVDQGWKH&ODVV

 PHPEHUVIROORZLQJPDQLIHVWDWLRQRIWKHGHIHFW

  7KHVHZDUUDQWLHVIRUPHGWKHEDVLVRIWKHEDUJDLQWKDWZDVUHDFKHGZKHQ3ODLQWLIIV

 DQGRWKHU&ODVVPHPEHUVSXUFKDVHG6ZLWFKHVDQG-R\&RQFRQWUROOHUV

  $V D UHVXOW RI 1LQWHQGR¶V DFWLRQV 3ODLQWLIIV DQG &ODVV PHPEHUV KDYH VXIIHUHG

 HFRQRPLFDQGRWKHUUHODWHGGDPDJHV

  3ODLQWLIIV DQG WKH &ODVV PHPEHUV KDYH FRPSOLHG ZLWK DOO REOLJDWLRQV XQGHU WKH

 ZDUUDQW\ RU RWKHUZLVH KDYH EHHQ H[FXVHG IURP SHUIRUPDQFH RI VDLG REOLJDWLRQV DV D UHVXOW RI

 1LQWHQGR¶VFRQGXFWGHVFULEHGKHUHLQ



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 53 of 101


 &2817,,
%5($&+2)7+(,03/,(':$55$17<2)0(5&+$17$%,/,7<
 2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKH6WDWH6XEFODVVHV 

  3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

 WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

  1LQWHQGRLVD³PHUFKDQW´DVGHILQHGXQGHUWKH8&&

  7KH6ZLWFKHVDQG-R\&RQFRQWUROOHUVDUH³JRRGV´DVGHILQHGXQGHUWKH8&&

  $ZDUUDQW\WKDW6ZLWFKHVDQG-R\&RQFRQWUROOHUVZHUHLQPHUFKDQWDEOHTXDOLW\

 DQG FRQGLWLRQ LV LPSOLHG E\ ODZ LQ WUDQVDFWLRQV IRU WKH SXUFKDVH RI 6ZLWFKHV DQG -R\&RQ

 FRQWUROOHUV 1LQWHQGR LPSOLHGO\ ZDUUDQWHG WKDW WKH 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV ZHUH RI

 JRRGDQGPHUFKDQWDEOHFRQGLWLRQDQGTXDOLW\ILWIRUWKHLURUGLQDU\LQWHQGHGXVHLQFOXGLQJZLWK

 UHVSHFWWRUHOLDELOLW\RSHUDELOLW\JDPHSOD\DQGVXEVWDQWLDOIUHHGRPIURPGHIHFWV

  7KH 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV ZKHQ VROG DQG DW DOO WLPHV WKHUHDIWHU

 ZHUHQRWLQPHUFKDQWDEOHFRQGLWLRQDQGDUHQRWILWIRUWKHRUGLQDU\SXUSRVHIRUZKLFKWKH\DUH

 XVHG7KH-R\&RQGHIHFWUHQGHUVWKHGHYLFHVXQPHUFKDQWDEOHDVWKH\DUHXQUHOLDEOHSDUWLDOO\RU

 IXOO\LQRSHUDEOHDQGQRWVXEVWDQWLDOO\IUHHIURPGHIHFWV

  1LQWHQGR ZDV SURYLGHG ZLWK QRWLFH RI WKH LVVXHV FRPSODLQHG RI KHUHLQ E\

 QXPHURXV FRPSODLQWV ILOHG DJDLQVW WKHP LQFOXGLQJ WKH LQVWDQW ODZVXLW ZLWKLQ D UHDVRQDEOH

 DPRXQWRIWLPH

  3ODLQWLIIV DQG WKH RWKHU &ODVV PHPEHUV KDYH KDG VXIILFLHQW GLUHFW GHDOLQJV ZLWK

 HLWKHU1LQWHQGRRULWVDJHQWVWRHVWDEOLVKSULYLW\RIFRQWUDFWEHWZHHQ1LQWHQGRRQRQHKDQGDQG

 3ODLQWLIIVDQGHDFKRIWKH&ODVVPHPEHUVRQWKHRWKHUKDQG1RQHWKHOHVVSULYLW\LVQRWUHTXLUHG

 KHUHEHFDXVH3ODLQWLIIVDQGHDFKRIWKH&ODVVPHPEHUVDUHLQWHQGHGWKLUGSDUW\EHQHILFLDULHVRI

 FRQWUDFWVEHWZHHQ1LQWHQGRDQGLWVWKLUGSDUW\UHWDLOHUVDQGVSHFLILFDOO\RI1LQWHQGR¶VLPSOLHG

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 54 of 101


 ZDUUDQWLHV7KHGHDOHUVZHUHQRWLQWHQGHGWREHWKHXOWLPDWHFRQVXPHUVRIWKHGHYLFHVDQGKDYH

 QR ULJKWV XQGHU WKH ZDUUDQW\ DJUHHPHQWV WKH ZDUUDQW\ DJUHHPHQWV ZHUH GHVLJQHG IRU DQG

 LQWHQGHGWREHQHILWWKHFRQVXPHUVRQO\

  $VDGLUHFWDQGSUR[LPDWHUHVXOWRIWKHEUHDFKRIVDLGZDUUDQWLHV3ODLQWLIIVDQG

 &ODVVPHPEHUVZHUHLQMXUHGDQGDUHHQWLWOHGWRGDPDJHV


&2817,,,
 9,2/$7,2162)7+(&$/,)251,$
&21680(5/(*$/5(0(',(6$&7
 &$/&,9&2'(††et seq  ³&/5$´ 
2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 
 
 3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

 1LQWHQGRLVD³SHUVRQ´DVWKDWWHUPLVGHILQHGLQ&$/&,9&2'(† F 

 3ODLQWLIIV 'LD] DQG /XHEFNH DQG PHPEHUV RI WKH &DOLIRUQLD 6XEFODVV DUH

³FRQVXPHUV´DVWKDWWHUPLVGHILQHGLQ&$/&,9&2'(† G 

 1LQWHQGRHQJDJHGLQXQIDLUDQGGHFHSWLYHDFWVLQYLRODWLRQRIWKH&/5$E\WKH

SUDFWLFHVGHVFULEHGDERYHDQGE\NQRZLQJO\DQGLQWHQWLRQDOO\FRQFHDOLQJIURP3ODLQWLIIV'LD]

DQG/XHEFNHDQG&DOLIRUQLD6XEFODVVPHPEHUVWKDWWKH6ZLWFKHVDQG-R\&RQFRQWUROOHUVVXIIHU

IURP WKH 'ULIW 'HIHFW 7KHVH DFWV DQG SUDFWLFHV YLRODWH DW D PLQLPXP WKH IROORZLQJ &/5$

VHFWLRQV

D  5HSUHVHQWLQJWKDWJRRGVRUVHUYLFHVKDYHVSRQVRUVKLSV
 FKDUDFWHULVWLFVXVHVEHQHILWVRUTXDQWLWLHVZKLFKWKH\GRQRW
KDYH
 
D  5HSUHVHQWLQJWKDWJRRGVRUVHUYLFHVDUHRIDSDUWLFXODU
 VWDQGDUGTXDOLW\RUJUDGHRUWKDWJRRGVDUHRIDSDUWLFXODUVW\OH
RUPRGHOLIWKH\DUHRIDQRWKHUDQG
  


7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 55 of 101


 D  $GYHUWLVLQJJRRGVDQGVHUYLFHVZLWKWKHLQWHQWQRWWRVHOO
WKHPDVDGYHUWLVHG


  1LQWHQGR¶VXQIDLURUGHFHSWLYHDFWVRUSUDFWLFHVRFFXUUHGUHSHDWHGO\LQLWVWUDGHRU

 EXVLQHVVDQGZHUHFDSDEOHRIGHFHLYLQJDVXEVWDQWLDOSRUWLRQRIWKHSXUFKDVLQJSXEOLF

  1LQWHQGRNQHZWKDWWKH6ZLWFKHVDQG-R\&RQFRQWUROOHUVZHUHGHIHFWLYHZRXOG

 IDLOSUHPDWXUHO\DQGZHUHQRWVXLWDEOHIRUWKHLULQWHQGHGXVH

  1LQWHQGR ZDV XQGHU D GXW\ WR 3ODLQWLIIV 'LD] DQG /XHEFNH DQG WKH &DOLIRUQLD

 6XEFODVVPHPEHUVWRGLVFORVHWKHGHIHFWLYHQDWXUHRIWKHGHYLFHVEHFDXVH

 D 1LQWHQGR ZDV LQD VXSHULRU SRVLWLRQ WR NQRZ WKH WUXH VWDWHRI IDFWV DERXW

 WKHGHIHFW

 E 3ODLQWLIIVDQGWKH&DOLIRUQLD6XEFODVVPHPEHUVFRXOGQRWUHDVRQDEO\KDYH

 EHHQH[SHFWHGWROHDUQRUGLVFRYHUWKDWWKHGHYLFHVKDGDGHIHFWDWWKHWLPH

 RISXUFKDVHDQG

 F 1LQWHQGR NQHZ WKDW 3ODLQWLIIV 'LD] DQG /XHEFNH DQG WKH &DOLIRUQLD

 6XEFODVV PHPEHUV FRXOG QRW UHDVRQDEO\ KDYH EHHQ H[SHFWHG WR OHDUQ RU

 GLVFRYHUWKHGHIHFWDQGWKHDVVRFLDWHGFRVWVXQWLOWKHPDQLIHVWDWLRQRIWKH

 GHIHFW

  ,QIDLOLQJWRGLVFORVHWKH'ULIW'HIHFWDQGWKHDVVRFLDWHGFRVWVDQGKDUPWKDWUHVXOW

 IURPLW1LQWHQGRKDVNQRZLQJO\DQGLQWHQWLRQDOO\FRQFHDOHGPDWHULDOIDFWVDQGEUHDFKHGLWVGXW\

 WRGLVFORVHWKLVPDWHULDOLQIRUPDWLRQ

  7KHIDFWVFRQFHDOHGRUQRWGLVFORVHGE\1LQWHQGRWR3ODLQWLIIV'LD]DQG/XHEFNH

 DQG WKH &DOLIRUQLD 6XEFODVV PHPEHUV DUH PDWHULDO LQ WKDW D UHDVRQDEOH FRQVXPHU ZRXOG KDYH

 FRQVLGHUHG WKHP WR EH LPSRUWDQW LQ GHFLGLQJ ZKHWKHU WR SXUFKDVH WKH GHYLFHV RU SD\ D OHVVHU

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 56 of 101


 SULFH+DG3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVVNQRZQDERXWWKHGHIHFWLYH

 QDWXUHRIWKH6ZLWFKHVDQG-R\&RQFRQWUROOHUVWKH\ZRXOGQRWKDYHSXUFKDVHGWKHPRUZRXOG

 KDYHSDLGOHVVIRUWKHPWKHQWKH\GLG

  $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V FRQGXFW 3ODLQWLIIV 'LD] DQG

 /XHEFNHDQG&DOLIRUQLD6XEFODVV0HPEHUVKDYHEHHQKDUPHG

  ,QMXQFWLYHUHOLHIE\DQGODUJHZRXOG EHQHILWWKHJHQHUDOSXEOLFKHUH,QMXQFWLYH

 UHOLHIEHQHILWV3ODLQWLIIRQO\LQFLGHQWDOO\DVPHPEHUVRIWKHJHQHUDOSXEOLFEHFDXVH3ODLQWLIIKDV

 DOUHDG\EHHQLQMXUHGE\DQGLVWKHUHIRUHDZDUHRIWKHDOOHJHGPLVFRQGXFWRI1LQWHQGR


&2817,9
 9,2/$7,2162)7+(&$/,)251,$81)$,5&203(7,7,21/$:
&$/%86 352)&2'(et seq.††  ³8&/´ 
 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 

  3ODLQWLIIVLQFRUSRUDWHWKHDERYHDOOHJDWLRQVE\UHIHUHQFH

  7KH8&/SURVFULEHVDFWVRIXQIDLUFRPSHWLWLRQLQFOXGLQJ³DQ\XQODZIXOXQIDLU

 RU IUDXGXOHQWEXVLQHVVDFWRUSUDFWLFHDQGXQIDLUGHFHSWLYHXQWUXHRUPLVOHDGLQJDGYHUWLVLQJ´

 &$/%86 352)&2'(†$VVHWIRUWKEHORZ1LQWHQGRKDVYLRODWHGDOOWKUHHSURQJVRI

 WKHVWDWXWH

 8QODZIXO

  1LQWHQGR¶V FRQGXFW LV XQODZIXO LQ YLRODWLRQ RI WKH 8&/ EHFDXVH LWV FRQGXFW

 FRQWUDYHQHV WKH OHJLVODWLYHO\ GHFODUHG SROLF\ DJDLQVW XQIDLU PHWKRGV RI EXVLQHVV FRPSHWLWLRQ

 $GGLWLRQDOO\ 1LQWHQGR¶V FRQGXFW LV XQODZIXO EHFDXVH DV VHW IRUWK KHUHLQ LW YLRODWHV WKH

 &DOLIRUQLD&RQVXPHU/HJDO5HPHGLHV$FWWKH6RQJ%HYHUO\:DUUDQW\$FWYDULRXVRWKHUVWDWH

 VWDWXWHVDVVHUWHGKHUHLQDQGFRQVWLWXWHVEUHDFKRIH[SUHVVDQGLPSOLHGZDUUDQWLHVDQGIUDXGXOHQW

 FRQFHDOPHQW

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 57 of 101


 8QIDLU

  1LQWHQGR¶V FRQGXFW LV XQIDLU LQ YLRODWLRQ RI WKH 8&/ EHFDXVH LW YLRODWHV

 &DOLIRUQLD SXEOLF SROLF\ OHJLVODWLYHO\ GHFODUHG LQ WKH 6RQJ%HYHUO\ &RQVXPHU :DUUDQW\ $FW

 UHTXLULQJ D PDQXIDFWXUHU²GHILQHG DV D SHUVRQ RU HQWLW\ WKDW ³PDQXIDFWXUHV DVVHPEOHV RU

 SURGXFHV FRQVXPHU JRRGV´²WR HQVXUH WKDW JRRGV LW SODFHV RQ WKH PDUNHW DUH ILW IRU WKHLU

 RUGLQDU\DQGLQWHQGHGSXUSRVHV

  1LQWHQGRDFWHGLQDQXQHWKLFDOXQVFUXSXORXVRXWUDJHRXVRSSUHVVLYHDQG

 VXEVWDQWLDOO\LQMXULRXVPDQQHULQFOXGLQJDVIROORZV

 x 1LQWHQGRSURPRWHGDQGVROG6ZLWFKHV-R\&RQVDQG6ZLWFK/LWHVWKDWLWNQHZ

 ZHUHGHIHFWLYHSRVVHVVWKHGULIWLQJLVVXHDQGIDLOSUHPDWXUHO\

 x 1LQWHQGR IDLOHG WR GLVFORVH WKDW WKH 6ZLWFKHV -R\&RQV DQG 6ZLWFK /LWHV DUH
 GHIHFWLYH DQG UHSUHVHQWHG WKURXJK DGYHUWLVLQJ SURGXFW SDFNDJLQJ SUHVV
 UHOHDVHV DQG RWKHU VRXUFHV WKDW WKH\ SRVVHVVHG SDUWLFXODU TXDOLWLHV WKDW ZHUH
 LQFRQVLVWHQWZLWKLWVLQWHUQDONQRZOHGJH
 x 1LQWHQGRPDGHUHSDLUVRUJDYHUHSODFHPHQWVWKDWZHUHLQHIIHFWLYHWRUHPRYHWKH
 'ULIWLQJ 'HIHFW H[SRVLQJ FRQVXPHUV WR UHSHDWHG LQVWDQFHV RI IDLOXUH DQG
 UHQGHULQJLWVZDUUDQW\XVHOHVV
 x 1LQWHQGRIDLOHGWRH[HUFLVHDGHTXDWHTXDOLW\FRQWURODQGGXHGLOLJHQFHRYHUWKH
 6ZLWFKHV-R\&RQVDQG6ZLWFK/LWHVEHIRUHODXQFKDQG

x 1LQWHQGRPLQLPL]HGWKHVFRSHDQGVHYHULW\RIWKHSUREOHPVZLWKWKH6ZLWFKHV

-R\&RQV DQG 6ZLWFK /LWHV UHIXVLQJ WR DFNQRZOHGJH WKDW WKHLU NH\ERDUGV DUH

GHIHFWLYH ZKLOH DW WKH VDPH WLPH FODQGHVWLQHO\ ZDLYLQJ WKH WHPSRUDO
 

&$/&,9&2'(† M 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 58 of 101


 OLPLWDWLRQV LQ LWV ZDUUDQW\ IRU LQGLYLGXDOV ZKR H[SHULHQFH GULIWLQJ  IDLOLQJ WR

 SURYLGHDGHTXDWHUHOLHIWRFRQVXPHUV

  7KH JUDYLW\ RI KDUP UHVXOWLQJ IURP 1LQWHQGR¶V XQIDLU FRQGXFW RXWZHLJKV DQ\

 SRWHQWLDOXWLOLW\7KHSUDFWLFHRIVHOOLQJGHIHFWLYH6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVZLWKRXW

 SURYLGLQJDQDGHTXDWHUHPHG\WRFXUHWKHGHIHFW²DQGFRQWLQXLQJWRVHOOWKHPZLWKRXWIXOODQG

 IDLU GLVFORVXUH RI WKH GHIHFW²KDUPV WKH SXEOLF DW ODUJH DQG LV SDUW RI D FRPPRQ DQG XQLIRUP

 FRXUVHRIZURQJIXOFRQGXFW

  7KHKDUPIURP1LQWHQGR¶VFRQGXFWZDVQRWUHDVRQDEO\DYRLGDEOHE\FRQVXPHUV

 EHFDXVH WKH 6ZLWFKHV 6ZLWFK /LWHV DQG -R\&RQV VXIIHU IURP D GHIHFW DQG 1LQWHQGR GLG QRW

 GLVFORVHWKHGHIHFWHYHQDIWHUUHFHLYLQJDODUJHYROXPHRIFRQVXPHUFRPSODLQWV3ODLQWLIIVGLG

 QRWNQRZRIDQGKDGQRUHDVRQDEOHPHDQVRIGLVFRYHULQJ6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQV

 DUHGHIHFWLYH

  7KHUH ZHUH UHDVRQDEO\ DYDLODEOH DOWHUQDWLYHV WKDW ZRXOG IXUWKHU 1LQWHQGR¶V

 EXVLQHVV LQWHUHVWV RI VDWLVI\LQJ DQG UHWDLQLQJ WKHLU FXVWRPHUV ZKLOH PDLQWDLQLQJ SURILWDELOLW\

 VXFKDV  DOORZLQJDGHTXDWHGHYHORSPHQWWLPHWRDQDO\]HWKHUHVXOWVRISUHUHOHDVHWHVWLQJDQG

 LPSOHPHQWLQJ FRUUHFWLYH PHDVXUHV LQFOXGLQJ EHIRUH ODXQFKLQJ WKH 6ZLWFK /LWH  

 DFNQRZOHGJLQJWKHGHIHFWDQGSURYLGLQJDSHUPDQHQWIL[IRUGHIHFWLYHMR\VWLFNVDQGFRQWUROV  

 GLVFORVLQJ WKH GHIHFW WR SURVSHFWLYH SXUFKDVHUV DQG   RIIHULQJ UHIXQGV RU VXLWDEOH QRQ

 GHIHFWLYHUHSODFHPHQWGHYLFHVWRFRQVXPHUVZKRVH6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVKDYH

 IDLOHG

 )UDXGE\2PLVVLRQ

  1LQWHQGR¶VFRQGXFW LVIUDXGXOHQWLQYLRODWLRQRIWKH8&/EHFDXVH LW LVOLNHO\ WR

 GHFHLYHDUHDVRQDEOHFRQVXPHU

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 59 of 101


 x 1LQWHQGR NQRZLQJO\ DQG LQWHQWLRQDOO\ FRQFHDOHG IURP FRQVXPHUV WKDW WKH

 6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVFRQWDLQDODWHQWGHIHFWWKDWUHQGHUVWKHP

 SURQHWRGULIWLQJDQGIDLOXUH

 x 1LQWHQGRYROXQWHHUHGLQIRUPDWLRQWRFRQVXPHUVWKURXJKDGYHUWLVLQJDQGWKURXJK
 RWKHU PHDQV WKDW WKH 6ZLWFKHV 6ZLWFK /LWHV DQG -R\&RQV ZHUH IXQFWLRQDO
 SUHPLXP JDPLQJ GHYLFHV ZLWKRXW GLVFORVLQJ LQIRUPDWLRQ WKDW ZRXOG KDYH
 PDWHULDOO\TXDOLILHGWKHVHSDUWLDOUHSUHVHQWDWLRQV
 x 1LQWHQGR SURPRWHG WKH KLJKTXDOLW\ DQG SUHPLXP IHDWXUHV RI WKH 6ZLWFKHV
 6ZLWFK /LWHV DQG -R\&RQV GHVSLWH NQRZLQJ WKH\ DUH GHIHFWLYH DQG IDLOHG WR
 FRUUHFWWKHPLVOHDGLQJSDUWLDOGLVFORVXUHV
  1LQWHQGR KDG DPSOH PHDQV DQG RSSRUWXQLWLHV WR DOHUW 3ODLQWLIIV DQG VLPLODUO\
 VLWXDWHG FRQVXPHUV WR WKH IDFW WKDW WKH 6ZLWFKHV 6ZLWFK /LWHV DQG -R\&RQV DUH GHIHFWLYH

 LQFOXGLQJ RQ LWV ZHEVLWH LQ DGYHUWLVHPHQWV IRU WKH 6ZLWFKHV -R\&RQV DQG 6ZLWFK /LWHV RQ

 H[WHUQDO SURGXFW SDFNDJLQJ LQ XVHU DQG ZDUUDQW\ PDQXDOV DQG DV SDUW RI WKH VWDQGDUGL]HG

 6ZLWFK6ZLWFK/LWHVHWXSSURFHVV%XW1LQWHQGRIDLOHGWRGLVFORVHWKHGHIHFWDOWRJHWKHU+DG

 1LQWHQGR GLVFORVHG WKH GHIHFW 3ODLQWLII DQG &ODVV PHPEHUV ZRXOG QRW KDYH SXUFKDVHG WKHLU

 6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVRUZRXOGQRWKDYHSXUFKDVHGWKHPDWWKHSULFHVWKH\GLG

  1LQWHQGRZDVXQGHUDGXW\WRGLVFORVHWKHGHIHFWJLYHQLWVH[FOXVLYHNQRZOHGJH


 RI WKH 'ULIW 'HIHFW EHFDXVH LW DFWLYHO\ FRQFHDOHG WKH GHIHFW IURP FRQVXPHUV DQG EHFDXVH LW

 PDGH SDUWLDO UHSUHVHQWDWLRQV DERXW WKH 6ZLWFKHV 6ZLWFK /LWHV DQG -R\&RQV ZLWKRXW DOVR

 GLVFORVLQJWKHODWHQWGHIHFW

  3ODLQWLIIVVXIIHUHGLQMXU\LQIDFWLQFOXGLQJORVWPRQH\RUSURSHUW\DVDUHVXOWRI


 1LQWHQGR¶V XQODZIXO XQIDLU DQG IUDXGXOHQW DFWV  $EVHQW 1LQWHQGR¶V XQODZIXO XQIDLU DQG

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 60 of 101


 IUDXGXOHQW FRQGXFW 3ODLQWLIIV DQG &ODVV PHPEHUV ZRXOG QRW KDYH SXUFKDVHG WKHLU 6ZLWFKHV

 6ZLWFK/LWHVDQG-R\&RQVRUZRXOGQRWKDYHSXUFKDVHGWKHPDWWKHSULFHVWKH\GLG

  7KURXJKLWVXQODZIXOXQIDLUDQGIUDXGXOHQWFRQGXFW1LQWHQGRDFTXLUHGPRQH\

 WKDW3ODLQWLIIVDQG&ODVVPHPEHUVRQFHKDGDQRZQHUVKLSLQWHUHVWLQ1LQWHQGRDFTXLUHGPRQH\

 IURPWKHPLQVRIDUDVWKH\SXUFKDVHGWKHLU6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVGLUHFWO\IURP

 1LQWHQGRRUWKURXJKLWVUHWDLOHUV HJ:DO0DUW*DPH6WRS%HVW%X\$PD]RQ7DUJHW 

  3ODLQWLIIV DFFRUGLQJO\ VHHN DSSURSULDWH UHOLHI LQFOXGLQJ UHVWLWXWLRQ XQGHU WKH

 8&/3ODLQWLIIVDOVRUHVSHFWIXOO\VHHNUHDVRQDEOHDWWRUQH\V¶IHHVDQGFRVWVXQGHUDSSOLFDEOHODZ

 LQFOXGLQJXQGHU&DOLIRUQLD&RGHRI&LYLO3URFHGXUHVHFWLRQ

 &28179
9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7
 )25%5($&+2)(;35(66:$55$17<
&$/&,9&2'(††  G 
 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 

  3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV
 WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

  3ODLQWLIIV 'LD] DQG /XHEFNH DQG WKH RWKHU &ODVV PHPEHUV ZKR SXUFKDVHG WKH
 GHYLFHVLQ&DOLIRUQLDDUH³EX\HUV´ZLWKLQWKHPHDQLQJRI&$/&,9&2'(† E 

  7KH6ZLWFKHVDQG-R\&RQFRQWUROOHUVDUH³FRQVXPHUJRRGV´ZLWKLQWKHPHDQLQJ


 RI&$/&,9&2'(† D 

  1LQWHQGRLVD³PDQXIDFWXUHU´ZLWKLQWKHPHDQLQJRI&$/&,9&2'(† M 


  1LQWHQGRPDGHH[SUHVVZDUUDQWLHVWR3ODLQWLIIV'LD]DQG/XHEFNHDQGWKHRWKHU
 &DOLIRUQLD &ODVV PHPEHUV ZLWKLQ WKH PHDQLQJ RI &$/ &,9 &2'( †† DQG  DV

 GHVFULEHGDERYH



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 61 of 101


  1LQWHQGR EUHDFKHG WKHVH ZDUUDQWLHV E\ VHOOLQJ WKH 6ZLWFKHV DQG -R\&RQ

 FRQWUROOHUV ZLWK WKH GHIHFW UHTXLULQJ UHSDLU RU UHSODFHPHQW ZLWKLQ WKH DSSOLFDEOH ZDUUDQW\

 SHULRGVDQGUHIXVLQJWRKRQRUWKHZDUUDQWLHVE\SURYLGLQJIUHHUHSDLUVRUUHSODFHPHQWVGXULQJ

 WKHDSSOLFDEOHZDUUDQW\SHULRGV

  $V DOOHJHG DERYH WKH WHUPV RI 1LQWHQGR¶V H[SUHVV ZDUUDQW\ DUH ERWK

 VXEVWDQWLYHO\ DQG SURFHGXUDOO\ XQFRQVFLRQDEOH  1LQWHQGR¶V DWWHPSW WR GLVFODLP RU OLPLW WKHVH

 H[SUHVV ZDUUDQWLHV LV XQFRQVFLRQDEOH DQG XQHQIRUFHDEOH XQGHU WKH FLUFXPVWDQFHV KHUH

 6SHFLILFDOO\LWVZDUUDQW\OLPLWDWLRQLVXQHQIRUFHDEOHEHFDXVHLWNQRZLQJO\VROGDGHIHFWSURGXFW

 ZLWKRXWLQIRUPLQJFRQVXPHUVDERXWWKHGHIHFW

  7KHWLPHOLPLWVFRQWDLQHGLQ1LQWHQGR¶VZDUUDQW\SHULRGDUHDOVRXQFRQVFLRQDEOH

 DQG LQDGHTXDWH WR SURWHFW 3ODLQWLIIV 'LD] DQG /XHEFNH DQG WKH &DOLIRUQLD 6XEFODVV PHPEHUV

 $PRQJ RWKHU WKLQJV 3ODLQWLIIV 'LD] DQG /XHEFNH DQG &DOLIRUQLD 6XEFODVV PHPEHUV DQG QR

 PHDQLQJIXOFKRLFHLQGHWHUPLQLQJWKHVHWLPHOLPLWDWLRQVWKHWHUPVRIZKLFKXQUHDVRQDEO\IDYRU

 1LQWHQGR $ JURVV GLVSDULW\ RI EDUJDLQLQJ SRZHU H[LVWHG EHWZHHQ 1LQWHQGR DQG 3ODLQWLIIV DQG

 &DOLIRUQLD6XEFODVVPHPEHUVDQG1LQWHQGRNQHZRUVKRXOGKDYHNQRZQWKDWWKHGHYLFHVZHUH

 GHIHFWLYHDWWKHWLPHRIVDOHDQGZRXOGIDLOZHOOEHIRUHWKHHQGRIWKHLUXVHIXOOLYHV

  1LQWHQGR GLG QRW SURPSWO\ UHSODFH RU EX\ EDFN WKH GHYLFHV RI 3ODLQWLIIV DQG

 SURSRVHG&DOLIRUQLD6XEFODVVPHPEHUV

  $VDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VEUHDFKRILWVH[SUHVVZDUUDQWLHV

 3ODLQWLII DQG WKH RWKHU &DOLIRUQLD 6XEFODVV PHPEHUV UHFHLYHG JRRGV ZKRVH FRQGLWLRQ

 VXEVWDQWLDOO\LPSDLUVWKHLUYDOXH3ODLQWLIIV'LD]DQG/XHEFNHDQGWKHRWKHU&DOLIRUQLD6XEFODVV

 PHPEHUV KDYH EHHQ GDPDJHG DV D UHVXOW RI inter alia, WKH GLPLQLVKHG YDOXH RI 1LQWHQGR¶V



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 62 of 101


 SURGXFWV WKH SURGXFWV¶ PDOIXQFWLRQLQJ DQG DFWXDO DQG SRWHQWLDO LQFUHDVHG PDLQWHQDQFH DQG

 UHSDLUFRVWV

  3XUVXDQWWR&$/&,9&2'(†† 3ODLQWLIIVDQGWKHRWKHU&DOLIRUQLD

 6XEFODVVPHPEHUVDUHHQWLWOHGWRGDPDJHVDQGRWKHUOHJDODQGHTXLWDEOHUHOLHILQFOXGLQJDWWKHLU

 HOHFWLRQ WKH SXUFKDVH SULFH RI WKHLU 6ZLWFKHV RU -R\&RQ FRQWUROOHUV RU WKH RYHUSD\PHQW RU

 GLPLQXWLRQLQYDOXHRIWKHVHGHYLFHV

  3XUVXDQW WR &$/ &,9 &2'( † 3ODLQWLIIV 'LD] DQG /XHEFNH DQG WKH RWKHU

 &DOLIRUQLD6XEFODVVPHPEHUVDUHHQWLWOHGWRFRVWVDQGDWWRUQH\V¶IHHV


&28179,
 9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7
)25%5($&+2),03/,(':$55$17<
 &$/&,9&2'(††et seq. 
2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 
 
 3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

 7KH 6ZLWFKHV RU -R\&RQFRQWUROOHUVDUH³FRQVXPHUJRRGV´ZLWKLQWKH PHDQLQJ

RI&$/&,9&2'(† D 

 1LQWHQGRLVD³PDQXIDFWXUHU´ZLWKLQWKHPHDQLQJRI&$/&,9&2'(† M 

 1LQWHQGRLPSOLHGO\ZDUUDQWHGWR3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD

6XEFODVV WKDW WKH GHYLFHV ZHUH ³PHUFKDQWDEOH´ ZLWKLQ WKH PHDQLQJ RI &$/ &,9 &2'( ††

 D  

 &$/ &,9 &2'( †  D  VWDWHV  ³,PSOLHG ZDUUDQW\ RI PHUFKDQWDELOLW\´ RU

³LPSOLHG ZDUUDQW\WKDW JRRGV DUH PHUFKDQWDEOH´PHDQV WKDW WKH FRQVXPHU JRRGV PHHW HDFK RI

WKHIROORZLQJ

 3DVVZLWKRXWREMHFWLRQLQWKHWUDGHXQGHUWKHFRQWUDFWGHVFULSWLRQ

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 63 of 101


  $UHILWIRUWKHRUGLQDU\SXUSRVHVIRUZKLFKVXFKJRRGVDUHXVHG

  $UHDGHTXDWHO\FRQWDLQHGSDFNDJHGDQGODEHOHG

  &RQIRUPWRWKHSURPLVHVRUDIILUPDWLRQVRIIDFWPDGHRQWKHFRQWDLQHURUODEHO

  7KH 6ZLWFKHV RU -R\&RQ FRQWUROOHUV ZRXOG QRW SDVV ZLWKRXW REMHFWLRQ LQ WKH

 JDPLQJ FRQVROH WUDGH EHFDXVH WKH GHIHFW FDXVHV DOO RU VXEVWDQWLDOO\ DOO RI WKH FRQWUROOHUV WR

 H[SHULHQFHMR\VWLFNIDLOXUHDQGWRQRWRSHUDWHDVLQWHQGHG

  %HFDXVH WKH GHIHFW PDWHULDOO\ UHGXFHV WKH UHOLDELOLW\ DQG GHSHQGDELOLW\ RI WKH

 GHYLFHVWKH\DUHQRWILWIRURUGLQDU\SXUSRVHVIRUZKLFKVXFKJRRGVDUHXVHG

  7KH 6ZLWFKHV RU -R\&RQ FRQWUROOHUV DUH QRW DGHTXDWHO\ ODEHOHG EHFDXVH WKH

 ODEHOLQJ IDLOV WR GLVFORVH WKH GHIHFW DQG GRHV QRW DGYLVH &DOLIRUQLD 6XEFODVV PHPEHUV RI WKH

 GHIHFW

  7KHGHIHFWGHSULYHG3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVVRI

 WKHEHQHILWRIWKHLUEDUJDLQDQGKDVFDXVHGWKHGHYLFHVWREHZRUWKOHVVWKDQZKDW3ODLQWLIIVDQG

 RWKHUSURSRVHG&DOLIRUQLD6XEFODVVPHPEHUVSDLGIRUWKHP

  $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V EUHDFK RI LWV GXWLHV &DOLIRUQLD

 6XEFODVVPHPEHUVUHFHLYHGJRRGVZKRVHFRQGLWLRQVXEVWDQWLDOO\LPSDLUVWKHLUYDOXH3ODLQWLIIV

 'LD]DQG/XHEFNHDQGWKHSURSRVHG&DOLIRUQLD6XEFODVVKDYHEHHQGDPDJHGE\WKHGLPLQLVKHG

 YDOXH RI WKH 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV WKH GHYLFHV¶ PDOIXQFWLRQLQJ DQG DFWXDO DQG

 SRWHQWLDOLQFUHDVHGPDLQWHQDQFHDQGUHSDLURUUHSODFHPHQWFRVWV

  8QGHU&$/ &,9 &2'(†† G  3ODLQWLIIVDQG&DOLIRUQLD6XEFODVV

 PHPEHUVDUHHQWLWOHGWRGDPDJHVDQGRWKHUOHJDODQGHTXLWDEOHUHOLHILQFOXGLQJDWWKHLUHOHFWLRQ

 WKHSXUFKDVHSULFHRIWKHLU6ZLWFKHVRU-R\&RQFRQWUROOHUVRUWKHRYHUSD\PHQWRUGLPLQXWLRQLQ

 YDOXHRIWKHLUGHYLFHVDQGDUHDOVRHQWLWOHGWRWKHLUDWWRUQH\IHHVDQGFRVWV

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 64 of 101


 &28179,,
9,2/$7,2162))/25,'$¶6'(&(37,9($1'81)$,5
 75$'(35$&7,&(6$&7
)/$67$7†et seq ³)'873$´ 
 2Q%HKDOIRI3ODLQWLII7KRPSVRQDQGWKH)ORULGD6XEFODVV 

  3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

 WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

  3ODLQWLII7KRPSVRQEULQJVWKLVFODLPRQEHKDOIRIWKH)ORULGD6XEFODVV

  3ODLQWLII 7KRPSVRQ DQG )ORULGD 6XEFODVV PHPEHUV DUH ³FRQVXPHUV´ ZLWKLQ WKH

 PHDQLQJRI)/$67$7†  

  1LQWHQGR HQJDJHG LQ ³WUDGH RU FRPPHUFH´ ZLWKLQ WKH PHDQLQJ RI )/$ 67$7 †

   

  7KH)'873$SURKLELWV³>X@QIDLUPHWKRGVRIFRPSHWLWLRQXQFRQVFLRQDEOHDFWVRU

 SUDFWLFHV DQG XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\ WUDGH RU FRPPHUFH´

 )/$67$7†  

  1LQWHQGR¶VDFWVDQGSUDFWLFHVGHVFULEHGKHUHLQDUHXQIDLULQYLRODWLRQRI)ORULGD

 ODZ EHFDXVH LW YLRODWHV )ORULGD SXEOLF SROLF\ DQG ZDUUDQW\ ODZV UHTXLULQJ D PDQXIDFWXUHU WR

 HQVXUHWKDWJRRGVLWSODFHVRQWKHPDUNHWDUHILWIRUWKHLURUGLQDU\DQGLQWHQGHGSXUSRVHV

  1LQWHQGR DFWHG LQ DQ XQHWKLFDO XQVFUXSXORXV RXWUDJHRXV RSSUHVVLYH DQG

 VXEVWDQWLDOO\LQMXULRXVPDQQHULQDWOHDVWWKHIROORZLQJUHVSHFWV

 D SURPRWHGDQGVROG-R\&RQFRQWUROOHUVLWNQHZZHUHGHIHFWLYH

 E IDLOHG WR GLVFORVH WKH 'ULIW 'HIHFW DQG UHSUHVHQWHG WKURXJK DGYHUWLVLQJ

 DQGRWKHUVRXUFHVWKDWWKH-R\&RQFRQWUROOHUVSRVVHVVSDUWLFXODUTXDOLWLHV

 WKDWZHUHLQFRQVLVWHQWZLWK1LQWHQGR¶VDFWXDONQRZOHGJHRIWKHSURGXFW



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 65 of 101


 F PDGH UHSDLUV DQG SURYLGHG UHSODFHPHQWV WKDW FDXVHG 3ODLQWLII DQG FODVV

 PHPEHUV WR H[SHULHQFH UHSHDWHG LQVWDQFHV RI IDLOXUH UHQGHULQJ WKH

 ZDUUDQW\XVHOHVVDQG

 G PLQLPL]HG WKH VFRSH DQG VHYHULW\ RI WKH SUREOHPV ZLWK WKH -R\&RQ

 FRQWUROOHUVUHIXVLQJ WRDFNQRZOHGJH WKDWWKH\DUH GHIHFWLYH DQGIDLOLQJ

 WRSURYLGHDGHTXDWHUHOLHIWRFRQVXPHUV

  7KH JUDYLW\ RI KDUP UHVXOWLQJ IURP 1LQWHQGR¶V XQIDLU FRQGXFW RXWZHLJKV DQ\

 SRWHQWLDO XWLOLW\ 7KH SUDFWLFH RI PDUNHWLQJ DQG VHOOLQJ GHIHFWLYH -R\&RQ FRQWUROOHUV ZLWKRXW

 SURYLGLQJ DQ DGHTXDWH UHPHG\ WR FXUH WKH GHIHFW KDUPV WKH SXEOLF DW ODUJH DQG LV SDUW RI D

 FRPPRQDQGXQLIRUPFRXUVHRIZURQJIXOFRQGXFW

  7KHKDUPIURP1LQWHQGR¶VFRQGXFWZDVQRWUHDVRQDEO\DYRLGDEOHE\FRQVXPHUV

 (YHQDIWHUUHFHLYLQJDODUJHYROXPHRIFRQVXPHUFRPSODLQWV1LQWHQGRGLGQRWGLVFORVHWKH'ULIW

 'HIHFW 3ODLQWLII DQG FODVV PHPEHUV GLG QRW NQRZ RI DQG KDG QR UHDVRQDEOH PHDQV RI

 GLVFRYHULQJWKDWWKH-R\&RQVDUHGHIHFWLYH

  1LQWHQGRDOVRHQJDJHGLQGHFHSWLYHWUDGHSUDFWLFHVLQYLRODWLRQRI)ORULGDODZE\

 SURPRWLQJ WKH IXQFWLRQDOLW\ FRQYHQLHQFH DQG RSHUDELOLW\ RI WKH -R\&RQ FRQWUROOHUV ZKLOH

 ZLOOIXOO\IDLOLQJWRGLVFORVHDQGDFWLYHO\FRQFHDOLQJWKHLUGHIHFWQDWXUH

  1LQWHQGRFRPPLWWHGGHFHSWLYHDFWVDQGSUDFWLFHVZLWKWKHLQWHQWWKDWFRQVXPHUV

 VXFK DV 3ODLQWLII 7KRPSVRQ DQG )ORULGD 6XEFODVV PHPEHUV ZRXOG UHO\ XSRQ 1LQWHQGR¶V

 UHSUHVHQWDWLRQV DQG RPLVVLRQV ZKHQ GHFLGLQJ ZKHWKHU WR SXUFKDVH D 1LQWHQGR 6ZLWFK RU

 DGGLWLRQDO-R\&RQFRQWUROOHUV

  3ODLQWLIIDQG&ODVVPHPEHUVVXIIHUHGDVFHUWDLQDEOHORVVDVDGLUHFWDQGSUR[LPDWH

 UHVXOW RI 1LQWHQGR¶V XQIDLU DQG GHFHSWLYH DFWV RU SUDFWLFHV +DG 3ODLQWLII 7KRPSVRQ DQG WKH

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 66 of 101


 )ORULGD6XEFODVVPHPEHUVNQRZQWKDWWKH-R\&RQFRQWUROOHUVZHUHVXVFHSWLEOHWRWKH'ULIWLQJ

 'HIHFW WKH\ ZRXOG QRW KDYH SXUFKDVHG 1LQWHQGR 6ZLWFKHV DQGRU DGGLWLRQDO -R\&RQ

 FRQWUROOHUVRUZRXOGKDYHSDLGVLJQLILFDQWO\OHVVIRUWKHP$PRQJRWKHULQMXULHVWKH\RYHUSDLG

 IRU WKHLU 1LQWHQGR 6ZLWFKHV DQGRU DGGLWLRQDO -R\&RQ FRQWUROOHUV DQG WKHVH LWHPV VXIIHUHG D

 GLPLQXWLRQLQYDOXH

  3ODLQWLII 7KRPSVRQ DQG WKH )ORULGD 6XEFODVV PHPEHUV DUH HQWLWOHG WR UHFRYHU

 WKHLUDFWXDOGDPDJHVXQGHU)/$ 67$7†  DQGUHDVRQDEOHDWWRUQH\V¶IHHVXQGHU)/$

 67$7†  

  3ODLQWLII7KRPSVRQDOVRVHHNVDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQIDLUDQGGHFHSWLYH

 DFWVRUSUDFWLFHVSXUVXDQWWR)/$67$7†DQGDQ\RWKHUMXVWDQGSURSHUUHOLHIDYDLODEOH

 XQGHUWKH)'873$

 &28179,,,
9,2/$7,2162)7+(1(:-(56(<&21680(5)5$8'$&7
 1-67$7$11†(76(4  ³1-&)$´ 
2Q%HKDOIRI3ODLQWLIIV5LRVDQG*X\DQGWKH1HZ-HUVH\6XEFODVV 
 

  3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

 WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

  7KLV FODLP LV EURXJKW E\ 3ODLQWLIIV 5LRV DQG *X\ RQ EHKDOI RI WKH 1HZ -HUVH\

 6XEFODVV

  7KH 1-&)$ SURWHFWV FRQVXPHUV DJDLQVW ³DQ\ XQFRQVFLRQDEOH FRPPHUFLDO

 SUDFWLFH GHFHSWLRQ IUDXG IDOVH SUHWHQVH IDOVH SURPLVH PLVUHSUHVHQWDWLRQ RU WKH NQRZLQJ

 FRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQRIDQ\PDWHULDOIDFWZLWKLQWHQWWKDWRWKHUVUHO\XSRQVXFK

 FRQFHDOPHQW VXSSUHVVLRQ RU RPLVVLRQ LQ FRQQHFWLRQ ZLWK WKH VDOH RU DGYHUWLVHPHQW RI DQ\

 PHUFKDQGLVH´1-67$7$11†

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 67 of 101


  3ODLQWLIIV 5LRV DQG *X\ DQG 1HZ -HUVH\ 6XEFODVV PHPEHUV DUH FRQVXPHUV ZKR

 SXUFKDVHG1LQWHQGR6ZLWFKHVDQG-R\&RQFRQWUROOHUVIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH

  ,Q WKH FRXUVH RI 1LQWHQGR¶V EXVLQHVV LW NQRZLQJO\ FRQFHDOHG VXSSUHVVHG DQG

 RPLWWHGWKHIDFWWKDWWKH-R\&RQFRQWUROOHUVDUHGHIHFWLYHZLWKWKHLQWHQWWKDW3ODLQWLIIVDQGWKH

 &ODVVUHO\XSRQWKDWFRQFHDOPHQWVXSSUHVVLRQDQGRPLVVLRQZKHQSXUFKDVLQJ6ZLWFKV\VWHPV

 RU DGGLWLRQDO -R\&RQ FRQWUROOHUV  7KH H[LVWHQFH RI WKH 'ULIWLQJ 'HIHFW LV PDWHULDO WR D

 UHDVRQDEOHFRQVXPHULQWKDWLWFRQVWLWXWHVDORVVRIWKHFHQWUDOIXQFWLRQRIWKHSURGXFWFDXVHVWKH

 SURGXFW WR IDLO RI LWV HVVHQWLDO SXUSRVH DQG FDXVHV WKH 6ZLWFKHV DQG -R\&RQV WR EH ZRUWK

 VXEVWDQWLDOO\OHVVWKDQWKH\ZRXOGRWKHUZLVHEHYDOXHG

  1LQWHQGR KDV HQJDJHG LQ XQIDLU DQG GHFHSWLYH WUDGH SUDFWLFHV LQFOXGLQJ

 UHSUHVHQWLQJWKDWWKH-R\&RQFRQWUROOHUVKDYHFKDUDFWHULVWLFVXVHVEHQHILWVDQGTXDOLWLHVZKLFK

 WKH\ GR QRW KDYH UHSUHVHQWLQJ WKDW WKH -R\&RQ FRQWUROOHUV DUH RI D SDUWLFXODU VWDQGDUG DQG

 TXDOLW\ZKHQWKH\DUHQRWDGYHUWLVLQJWKH-R\&RQFRQWUROOHUVZLWKWKHLQWHQWWRQRWVHOOWKHPDV

 DGYHUWLVHGDQGRWKHUZLVHHQJDJLQJLQFRQGXFWOLNHO\WRGHFHLYH)XUWKHU1LQWHQGR¶VDFWVDQG

 SUDFWLFHV GHVFULEHG KHUHLQ RIIHQG HVWDEOLVKHG SXEOLF SROLF\ EHFDXVH RI WKH KDUP WKH\ FDXVH WR

 FRQVXPHUV RXWZHLJKV DQ\ EHQHILW DVVRFLDWHG ZLWK VXFK SUDFWLFHV DQG EHFDXVH 1LQWHQGR

 IUDXGXOHQWO\FRQFHDOHGWKHGHIHFWLYHQDWXUHRIWKH-R\&RQFRQWUROOHUVIURPFRQVXPHUV

  1LQWHQGR¶V DFWLRQV DV VHW IRUWK DERYH RFFXUUHG LQ WKH FRQGXFW RI WUDGH RU

 FRPPHUFH

  1LQWHQGR¶V FRQGXFW FDXVHG 3ODLQWLIIV 5LRV DQG *X\ DQG 1HZ -HUVH\ 6XEFODVV

 PHPEHUV WR VXIIHU DQ DVFHUWDLQDEOH ORVV  3ODLQWLIIV DQG WKH RWKHU &ODVV PHPEHUV ERXJKW

 6ZLWFKHV DQGRU DGGLWLRQDO -R\&RQ FRQWUROOHUV WKH\ RWKHUZLVH ZRXOG QRW KDYH ERXJKW YLGHR



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 68 of 101


 JDPHVWRSOD\RQWKHLU6ZLWFKHVRYHUSDLGIRUWKHVHSURGXFWVGLGQRWUHFHLYHWKHEHQHILWRIWKHLU

 EDUJDLQDQGWKHLU6ZLWFKHVDQG-R\&RQFRQWUROOHUVVXIIHUHGDGLPLQXWLRQLQYDOXH

  3ODLQWLIIVDQGRWKHUFODVVPHPEHUV¶GDPDJHVDUHWKHGLUHFWDQGIRUHVHHDEOHUHVXOW

 RI1LQWHQGR¶VXQODZIXOFRQGXFW+DGWKH'ULIWLQJ'HIHFWEHHQGLVFORVHGFRQVXPHUVZRXOGQRW

 KDYH SXUFKDVHG RU ZRXOG KDYH SDLG OHVV IRU WKH 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV DQG ZRXOG

 KDYHEHHQVSDUHGWKHVXEVHTXHQWH[SHQVHVDQGLQFRQYHQLHQFH

  3ODLQWLIIV 5LRV DQG *X\ DQG &ODVV DUH HQWLWOHG WR UHFRYHU WUHEOH GDPDJHV

 DWWRUQH\V¶IHHVILOLQJIHHVDQGUHDVRQDEOHFRVWV1-67$7$11†

  3ODLQWLIIVDOVRVHHNDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQODZIXODFWVRUSUDFWLFHVDQG

 DQ\RWKHUMXVWDQGSURSHUUHOLHIDYDLODEOHXQGHUWKH1-&)$

  3XUVXDQW WR 1- 67$7 $11 †  3ODLQWLIIV ZLOO VHUYH WKH 1HZ -HUVH\

 $WWRUQH\*HQHUDOZLWKDFRS\RIWKLV)LUVW$PHQGHG&ODVV$FWLRQ&RPSODLQW



 &2817,;
9,2/$7,2162)7+(1257+&$52/,1$
 81)$,5$1''(&(37,9(75$'(35$&7,&(6$&7
1&*(167$7†et seq. ³1&8'73$´ 
 2Q%HKDOIRI3ODLQWLII)RXFKDDQGWKH1RUWK&DUROLQD6XEFODVV 

  3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

 WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

  3ODLQWLII)RXFKDEULQJVWKLVFODLPRQEHKDOIRIWKH1RUWK&DUROLQD6XEFODVV

  7KH 1&8'73$ SURKLELWV D SHUVRQ IURP HQJDJLQJ LQ ³>X@QIDLU PHWKRGV RI

 FRPSHWLWLRQLQRUDIIHFWLQJFRPPHUFHDQGXQIDLURUGHFHSWLYHDFWVRUSUDFWLFHVLQRUDIIHFWLQJ

 FRPPHUFH>@´ 7KH 1&8'73$ SURYLGHV D SULYDWH ULJKW RI DFWLRQ IRU DQ\ SHUVRQ LQMXUHG ³E\



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 69 of 101


 UHDVRQ RI DQ\ DFW RU WKLQJ GRQH E\ DQ\ RWKHU SHUVRQ ILUP RU FRUSRUDWLRQ LQ YLRODWLRQ RI´ WKH

 1&8'73$1&*(167$7†

  1LQWHQGR¶VDFWVDQGSUDFWLFHVFRPSODLQHGRIKHUHLQZHUHSHUIRUPHGLQWKHFRXUVH

 RI1LQWHQGR¶VWUDGHRUEXVLQHVVDQGWKXVRFFXUUHGLQRUDIIHFWHG³FRPPHUFH´DVGHILQHGLQ1&

 *(167$7† E 

  1LQWHQGR¶V DFWV DQG SUDFWLFHV DUH XQIDLU LQ DW OHDVW WKH IROORZLQJ UHVSHFWV

 1LQWHQGR NQRZLQJO\ VROG 3ODLQWLII )RXFKD DQG 1RUWK &DUROLQD 6XEFODVV PHPEHUV -R\&RQ

 FRQWUROOHUVZLWKWKH'ULIWLQJ'HIHFWUHIXVHGWRFRPSO\ZLWKZDUUDQWLHVUHTXLUHGFRQVXPHUVWR

 ZDLW VHYHUDO ZHHNV WR VHYHUDO PRQWKV RQ ZDUUDQW\ FODLPV DQG UHSODFHG GHIHFWLYH FRQWUROOHUV

 ZLWKRWKHUGHIHFWLYHFRQWUROOHUV

  1LQWHQGR¶VDFWVDQGSUDFWLFHVDUHFRQWUDU\WR1RUWK&DUROLQDODZDQGSROLF\DQG

 FRQVWLWXWH LPPRUDO XQHWKLFDO RSSUHVVLYH DQG XQVFUXSXORXV EXVLQHVV SUDFWLFHV WKDW FDXVHG

 VXEVWDQWLDO LQMXU\ WR 3ODLQWLII DQG 1RUWK &DUROLQD 6XEFODVV PHPEHUV 7KH JUDYLW\ RI WKH KDUP

 UHVXOWLQJ IURP 1LQWHQGR¶V XQIDLU FRQGXFW RXWZHLJKV DQ\ SRWHQWLDO XWLOLW\ RI WKH FRQGXFW 7KH

 SUDFWLFHRIVHOOLQJGHIHFWLYH-R\&RQFRQWUROOHUVZLWKRXWSURYLGLQJDQDGHTXDWHUHPHG\WRFXUH

 WKH GHIHFW KDUPV WKH SXEOLF DW ODUJH DQG LV SDUWRI D FRPPRQ DQG XQLIRUP FRXUVH RI ZURQJIXO

 FRQGXFW 7KHUH DUH UHDVRQDEO\ DYDLODEOH DOWHUQDWLYHV WKDW ZRXOG IXUWKHU 1LQWHQGR¶V EXVLQHVV

 LQWHUHVWV RI LQFUHDVLQJ VDOHV DQG SUHYHQWLQJ IDOVH ZDUUDQW\ FODLPV 7KH KDUP IURP 1LQWHQGR¶V

 XQIDLUFRQGXFWZDVQRWUHDVRQDEO\DYRLGDEOHE\FRQVXPHUV

  1LQWHQGR¶VDFWVDQGSUDFWLFHVDUHGHFHSWLYHEHFDXVH1LQWHQGRZLOOIXOO\IDLOHGWR

 GLVFORVH DQG DFWLYHO\ FRQFHDOHG WKH 'ULIWLQJ 'HIHFW UHSUHVHQWHG WKDW WKH -R\&RQ FRQWUROOHUV

 KDYHFKDUDFWHULVWLFVXVHVEHQHILWVDQGTXDOLWLHVZKLFKWKH\GRQRWKDYHUHSUHVHQWHGWKDW-R\

 &RQFRQWUROOHUVDUHRIDSDUWLFXODUVWDQGDUGDQGTXDOLW\ZKHQWKH\DUHQRWDGYHUWLVHG1LQWHQGR

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 70 of 101


 6ZLWFKHVDQG-R\&RQFRQWUROOHUVZLWKWKHLQWHQWQRWWRVHOOWKHPDVDGYHUWLVHGDQGRWKHUZLVH

 HQJDJLQJLQFRQGXFWOLNHO\WRGHFHLYH

  1LQWHQGR¶V FRQGXFW SUR[LPDWHO\ FDXVHG LQMXULHV WR 3ODLQWLII DQG 1RUWK &DUROLQD

 6XEFODVVPHPEHUV

  1LQWHQGR DFWHG ZLWK ZLOOIXO DQG FRQVFLRXV GLVUHJDUG RI WKH ULJKWV RI RWKHUV

 VXEMHFWLQJ 3ODLQWLII DQG 1RUWK &DUROLQD 6XEFODVV PHPEHUV WR XQMXVW KDUGVKLS DV D UHVXOW VXFK

 WKDWDQDZDUGRISXQLWLYHGDPDJHVLVDSSURSULDWH

  3ODLQWLII DQG 1RUWK &DUROLQD 6XEFODVV PHPEHUV ZHUH LQMXUHG DV D UHVXOW RI

 1LQWHQGR¶VFRQGXFWLQWKDWWKH\RYHUSDLGIRUWKHLU6ZLWFKHVDQGH[WUD-R\&RQFRQWUROOHUVDQG

 GLG QRW UHFHLYH WKH EHQHILW RI WKHLU EDUJDLQ DQG WKHLU &ODVV 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV

 KDYH VXIIHUHG D GLPLQXWLRQ LQ YDOXH 7KHVH LQMXULHV DUH WKH GLUHFW DQG QDWXUDO FRQVHTXHQFH RI

 1LQWHQGR¶VYLRODWLRQVDOOHJHGKHUHLQ

  3ODLQWLII )RXFKD LQGLYLGXDOO\ DQG RQ EHKDOI RI 1RUWK &DUROLQD 6XEFODVV VHHNV

 WUHEOHGDPDJHVSXUVXDQWWR1&*(167$7†DQGDQDZDUGRIUHDVRQDEOHDWWRUQH\V¶IHHV

 SXUVXDQWWR1&*(167$7†


&2817;
 9,2/$7,212)7+(,//,12,6&21680(5)5$8'
$1''(&(37,9(%86,1(6635$&7,&(6$&7
 ,//&20367$7††et seq. ³,&)$´ 
2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV 
 
 3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

 3ODLQWLII2UHQEULQJVWKLVFODLPRQEHKDOIRIWKH,OOLQRLV6XEFODVV




7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 71 of 101


  3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUVDUH³FRQVXPHUV´ZLWKLQWKHPHDQLQJ

 RI,// &203 67$7† H 3ODLQWLIIWKH&ODVVDQG1LQWHQGRDUH³SHUVRQV´ZLWKLQWKH

 PHDQLQJRI,//&20367$7† F 

  1LQWHQGR LV HQJDJHG LQ ³WUDGH´ RU ³FRPPHUFH´ ZLWKLQ WKH PHDQLQJ RI  ,//

 &20367$7† I 

  1LQWHQGR HQJDJHVLQ WKH ³VDOH´ RI³PHUFKDQGLVH´ DV WKRVH WHUPVDUH GHILQHG E\

 ,//&20367$7† E DQG G 

  7KH ,&)$ SURKLELWV ³XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV LQFOXGLQJ EXW QRW

 OLPLWHG WR WKH XVH RU HPSOR\PHQW RI DQ\ GHFHSWLRQ IUDXG IDOVH SUHWHQVH IDOVH SURPLVH

 PLVUHSUHVHQWDWLRQRUWKHFRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQRIDQ\PDWHULDOIDFWZLWKLQWHQW

 WKDWRWKHUVUHO\XSRQWKHFRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQRIVXFKPDWHULDOIDFW´

 ,//&20367$7†

  ,Q WKH FRXUVH RI LWV EXVLQHVV WUDGH RU FRPPHUFH 1LQWHQGR ZLOOIXOO\ IDLOHG WR

 GLVFORVHDQGDFWLYHO\FRQFHDOHGWKH'ULIWLQJ'HIHFWDVGLVFXVVHGKHUHLQDQGRWKHUZLVHHQJDJHG

 LQ DFWLYLWLHV ZLWK D WHQGHQF\ RU FDSDFLW\ WR GHFHLYH 1LQWHQGR DOVR HQJDJHG LQ XQODZIXO WUDGH

 SUDFWLFHV E\ HPSOR\LQJ GHFHSWLRQ GHFHSWLYH DFWV RU SUDFWLFHV IUDXG RU FRQFHDOPHQW

 VXSSUHVVLRQRURPLVVLRQRIDQ\PDWHULDOIDFWZLWKLQWHQWWKDWRWKHUVUHO\XSRQVXFKFRQFHDOPHQW

 VXSSUHVVLRQ RU RPLVVLRQ LQ FRQQHFWLRQ ZLWK WKH VDOH RI WKH 6ZLWFK DQG GHIHFWLYH -R\&RQ

 FRQWUROOHUV

  1LQWHQGRNQHZWKURXJKSUHUHOHDVHWHVWLQJDQGQHJDWLYHFRQVXPHUUHVSRQVHVRU

 VKRXOGKDYHNQRZQWKDWWKH-R\&RQVZHUHGHIHFWLYHDQGWKDWWKH-R\&RQVGLGQRWSHUIRUPDV

 DGYHUWLVHGEXWFRQFHDOHGDOORIWKDWLQIRUPDWLRQ



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 72 of 101


  %\IDLOLQJWRGLVFORVHWKH'ULIWLQJ'HIHFWDQGDGYHUWLVLQJWKH6ZLWFKDQG-R\&RQ

 FRQWUROOHUVDVUHOLDEOHDQGDVEHLQJRIKLJKTXDOLW\DQGE\SUHVHQWLQJLWVHOIDVDUHSXWDEOHYLGHR

 JDPH FRQVROH PDQXIDFWXUHU 1LQWHQGR HQJDJHG LQ GHFHSWLYH EXVLQHVV SUDFWLFHV LQ YLRODWLRQ RI

 WKH,&)$

  1LQWHQGR¶V XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV ZHUH OLNHO\ WR DQG GLG LQ IDFW

 GHFHLYHUHDVRQDEOHFRQVXPHUVLQFOXGLQJ3ODLQWLII2UHQDQGWKHRWKHUFODVVPHPEHUVDERXWWKH

 WUXHSHUIRUPDQFHRIWKH-R\&RQFRQWUROOHUVWKHTXDOLW\RIWKH1LQWHQGR¶VEUDQGWKHWUXHYDOXH

 RIWKH6ZLWFKFRQVROHVDQG-R\&RQFRQWUROOHUV

  1LQWHQGRLQWHQWLRQDOO\DQGNQRZLQJO\FRQFHDOHGPDWHULDOIDFWVUHJDUGLQJWKH-R\

 &RQFRQWUROOHUVZLWKLQWHQWWRPLVOHDG3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUV

  1LQWHQGRSRVVHVVHGH[FOXVLYHNQRZOHGJHWKDWLWZDVPDQXIDFWXULQJVHOOLQJDQG

 GLVWULEXWLQJ -R\&RQ FRQWUROOHUV WKDW DUH SODJXHG ZLWK WKH 'ULIWLQJ 'HIHFW DQG WKDW GR QRW

 SHUIRUPDVDGYHUWLVHGDQGLWLQWHQWLRQDOO\FRQFHDOHGWKHIRUHJRLQJPDWHULDOIDFWVIURP3ODLQWLII

 2UHQDQGPHPEHUVRIWKHFODVVZKRGLGQRWKDYHDFFHVVWRWKLVLQIRUPDWLRQ

  %HFDXVH1LQWHQGRIUDXGXOHQWO\FRQFHDOHGWKHGHIHFWDQGWKHWUXHSHUIRUPDQFHRI

 WKH-R\&RQFRQWUROOHUVWKHYDOXHRIWKH-R\&RQVDQG6ZLWFKV\VWHPVKDVJUHDWO\GLPLQLVKHG

 7KH\DUHQRZZRUWKVLJQLILFDQWO\OHVVWKDQWKH\RWKHUZLVHZRXOGEH

  7KHH[LVWHQFHRIWKHGHIHFWZDVPDWHULDOWR3ODLQWLIIDQG,OOLQRLVFODVVPHPEHUV

  $VDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VYLRODWLRQVRIWKH,&)$3ODLQWLII

 DQGWKHFODVVPHPEHUVLQ,OOLQRLVKDYHVXIIHUHGLQMXU\LQIDFWDQGRUDFWXDOGDPDJH

  3ODLQWLII2UHQDQGVLPLODUO\VLWXDWHGFRQVXPHUVLQ,OOLQRLVVXIIHUHGDVFHUWDLQDEOH

 ORVV FDXVHG E\ 1LQWHQGR¶V FRQFHDOPHQW RI DQG IDLOXUH WR GLVFORVH PDWHULDO LQIRUPDWLRQ &ODVV

 PHPEHUVZKRSXUFKDVHG6ZLWFKHVDQGH[WUD-R\&RQFRQWUROOHUVHLWKHUZRXOGKDYHSDLGOHVVIRU

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 73 of 101


 WKHPRUZRXOGQRWKDYHSXUFKDVHGWKHPDWDOO'XHWR1LQWHQGR¶VGHFHSWLYHRUXQIDLUFRQGXFW

 3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUVRYHUSDLGIRUWKHLU6ZLWFKHVDQGDGGLWLRQDO-R\&RQ

 FRQWUROOHUVDQGGLGQRWUHFHLYHWKHEHQHILWRIWKHLUEDUJDLQ

  3ODLQWLII 2UHQ DQG RZQHUV RI 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV DOVR VXIIHUHG

 DVFHUWDLQDEOHORVVLQWKHIRUPRIWKHGLPLQLVKHGYDOXHRIWKHLU6ZLWFKHVDQG-R\&RQFRQWUROOHUV

 DV D UHVXOW RI 1LQWHQGR¶V GHFHSWLYH DQG XQIDLU DFWV DQG SUDFWLFHV PDGH LQ WKH FRXUVH RI

 1LQWHQGR¶VEXVLQHVV

  3XUVXDQW WR  ,// &203 67$7 † D D  3ODLQWLII 2UHQ DQG WKH ,OOLQRLV

 FODVVVHHNDFWXDOGDPDJHVFRPSHQVDWRU\SXQLWLYHGDPDJHV SXUVXDQWWR,//&20367$7†

 D F  LQMXQFWLYH UHOLHI DQG FRXUW FRVWV DQG DWWRUQH\V¶ IHHV DV D UHVXOW RI 1LQWHQGR¶V

 YLRODWLRQVRIWKH,&)$


&2817;,
 9,2/$7,2162)7+(,//,12,681,)250
'(&(37,9(75$'(35$&7,&(6$&7
 ,//&20367$7††et seq ³,OOLQRLV'73$´ 
2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV 
 

  3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

 WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

  3ODLQWLII2UHQEULQJVWKLVFODLPRQEHKDOIRIWKH,OOLQRLV6XEFODVV

  3ODLQWLII2UHQWKH,OOLQRLVFODVVPHPEHUVDQG1LQWHQGRDUH³SHUVRQV´DVGHILQHG

 LQ,//&20367$7†  

  7KH ,OOLQRLV '73$ EURDGO\ SURKLELWV GHFHSWLYH WUDGH SUDFWLFHV $V VHW IRUWK

 KHUHLQ 1LQWHQGR FRPPLWWHG XQIDLU DQG GHFHSWLYH WUDGH SUDFWLFHV E\ PLVUHSUHVHQWLQJ WKH

 FDSDELOLWLHVTXDOLWLHVDQGSHUIRUPDQFHRIWKH6ZLWFKDQG-R\&RQFRQWUROOHUVDQGFRQFHDOLQJD

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 74 of 101


 NQRZQGHIHFW$FFRUGLQJO\1LQWHQGRKDVHQJDJHGLQGHFHSWLYHWUDGHSUDFWLFHVDVGHILQHGLQ

 ,//&20367$7†

  1LQWHQGR¶V DFWLRQV DV VHW IRUWK DERYH RFFXUUHG LQ WKH FRQGXFW RI WUDGH RU

 FRPPHUFH

  1LQWHQGRNQHZRUVKRXOGKDYHNQRZQWKDWLWVFRQGXFWYLRODWHGWKH,OOLQRLV'73$

  1LQWHQGR¶VFRQGXFWZDVPDWHULDOWR3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUV

  $VVHWIRUWKKHUHLQ3ODLQWLIIDQGWKH,OOLQRLVFODVVPHPEHUVVXIIHUHGDVFHUWDLQDEOH

 ORVVFDXVHGE\1LQWHQGR¶VYLRODWLRQVRIWKH,OOLQRLV'73$ZKLFKSUR[LPDWHO\FDXVHGLQMXULHVWR

 3ODLQWLIIDQGWKHRWKHU&ODVVPHPEHUV

  )XUWKHUPRUH3ODLQWLII2UHQDQG,OOLQRLVFODVVPHPEHUVIDFHDVLJQLILFDQWULVNRI

 IXWXUH KDUP 1LQWHQGR UHSHDWHGO\ IDLOV WR IL[ FRQVXPHUV -R\&RQV XQGHU WKH WHUPV RI LWV

 ZDUUDQW\ DQG LWV HIIRUWV WR UHPHGLDWH WKLV LVVXH KDYH IDLOHG 1LQWHQGR DOVR FRQWLQXHV WR RPLW

 PDWHULDO LQIRUPDWLRQ DERXW WKH GHIHFW IURP FRQVXPHUV %HFDXVH WKHUH LV QR LQGLFDWLRQ WKDW

 1LQWHQGR ZLOO FRUUHFW WKLV ZURQJGRLQJ DQ LQMXQFWLRQ LV QHFHVVDU\ WR SUHYHQW FRQWLQXHG DQG

 IXWXUHKDUPWR3ODLQWLII2UHQDQGRWKHU,OOLQRLVFODVVPHPEHUV

  3XUVXDQWWR,//&20367$7†3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVDUH

 HQWLWOHG WR DQ DZDUG RI LQMXQFWLYH UHOLHI WR SUHYHQW 1LQWHQGR¶V GHFHSWLYH WUDGH SUDFWLFHV DQG

 EHFDXVH1LQWHQGR¶VFRQGXFWZDVZLOOIXODQDZDUGRIUHDVRQDEOHDWWRUQH\V¶IHHV

 &2817;,,
9LRODWLRQVRIWKH:DVKLQJWRQ&RQVXPHU3URWHFWLRQ$FW
 :$6+5(9&2'(††et seq. ³:&3$´ 
2Q%HKDOIRI3ODLQWLII'H/RDFKDQGWKH:DVKLQJWRQ6XEFODVV 

 3ODLQWLIIVLQFRUSRUDWHWKHDERYHDOOHJDWLRQVE\UHIHUHQFH


  3ODLQWLII 'H/RDFK DVVHUWV WKLV FODLP RQ EHKDOI RI KHUVHOI DQG WKH :DVKLQJWRQ
6XEFODVV

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 75 of 101



 1LQWHQGR3ODLQWLII'H/RDFKDQG:DVKLQJWRQ6XEFODVVPHPEHUVDUH³SHUVRQV´
 XQGHU:$6+5(9&2'(†  

  1LQWHQGR¶V DFWV RU SUDFWLFHV DV VHW IRUWK DERYH RFFXUUHG LQ WKH FRQGXFW RI
 ³WUDGH´RU³FRPPHUFH´ZLWKLQWKHPHDQLQJRI:$6+5(9&2'(†  

  :DVKLQJWRQ ODZ SURKLELWV ³>X@QIDLU PHWKRGV RI FRPSHWLWLRQ DQG XQIDLU RU

 GHFHSWLYH DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\ WUDGH RU SUDFWLFHV´ :$6+ 5(9 &2'( ††


 1LQWHQGR¶V DFWV DQG SUDFWLFHV GHVFULEHG KHUHLQ DUH XQIDLU LQ YLRODWLRQ RI

:DVKLQJWRQODZIRUWKHUHDVRQVDOUHDG\VWDWHG

 %\VHOOLQJGHIHFWLYH1LQWHQGR6ZLWFKDQG-R\&RQVSODJXHGE\WKH'ULIW'HIHFW

ZLWK H[FOXVLYH NQRZOHGJH RI WKH GHIHFW DQG E\ IDLOLQJ WR GLVFORVH WKH GHIHFW LQ JRRG IDLWK

1LQWHQGR DFWHG XQVFUXSXORXVO\ LQ D PDQQHU WKDW LV VXEVWDQWLDOO\ RSSUHVVLYH DQG LQMXULRXV WR
 FRQVXPHUV

  1LQWHQGRHQJDJHGLQGHFHSWLYHWUDGHSUDFWLFHVLQYLRODWLRQRI:DVKLQJWRQODZE\


 ZLOOIXOO\IDLOLQJWRGLVFORVHDQGDFWLYHO\FRQFHDOLQJWKHGHIHFWLYHQDWXUHRIWKH-R\&RQV

  1LQWHQGRFRPPLWWHGGHFHSWLYHDFWVDQGSUDFWLFHVZLWKWKHLQWHQWWKDWFRQVXPHUV

 VXFKDV3ODLQWLII'H/RDFKDQG:DVKLQJWRQ6XEFODVVPHPEHUVZRXOGUHO\XSRQ1LQWHQGR¶V
UHSUHVHQWDWLRQVDQGRURPLVVLRQVZKHQGHFLGLQJZKHWKHUWRSXUFKDVHD6ZLWFKDQGRUDGGLWLRQDO

-R\&RQV

 3ODLQWLII 'H/RDFK DQG :DVKLQJWRQ 6XEFODVV PHPEHUV VXIIHUHG DVFHUWDLQDEOH

ORVVDVDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VXQIDLUDQGGHFHSWLYHDFWVRUSUDFWLFHV+DG
 3ODLQWLII'H/RDFKDQG:DVKLQJWRQ6XEFODVVPHPEHUVNQRZQWKDWWKH-R\&RQVZHUHGHIHFWLYH

 WKH\ZRXOGQRWKDYHSXUFKDVHGD6ZLWFKFRQVROHRUVHSDUDWHVHWVRI-R\&RQVRUZRXOGKDYH

 SDLG VLJQLILFDQWO\ OHVV IRU WKHP $PRQJ RWKHU LQMXULHV 3ODLQWLII 'H/RDFK DQG :DVKLQJWRQ
6XEFODVV PHPEHUV RYHUSDLG IRU WKHLU 6ZLWFK DQG -R\&RQV ZKLFK VXIIHUHG D GLPLQXWLRQ LQ

YDOXH

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 76 of 101



 1LQWHQGR¶V YLRODWLRQV RI WKH :&3$ SUHVHQW D FRQWLQXLQJ ULVN WR 3ODLQWLII
 'H/RDFK DQG :DVKLQJWRQ 6XEFODVV PHPEHUV DV ZHOO DV WR WKH JHQHUDO SXEOLF 1LQWHQGR¶V

 XQODZIXODFWVDQGSUDFWLFHVDGYHUVHO\DIIHFWWKHSXEOLFLQWHUHVW

  8QGHU :$6+ 5(9 &2'( †  3ODLQWLII 'H/RDFK DQG WKH :DVKLQJWRQ

 6XEFODVVVHHNDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQIDLUDQGGHFHSWLYHDFWVRUSUDFWLFHVSURYLGLQJ
IRUDSSURSULDWHPRQHWDU\UHOLHILQFOXGLQJWUHEOHGGDPDJHVDQGDZDUGLQJUHDVRQDEOHDWWRUQH\V¶

IHHVDQGFRVWV

 ,Q DFFRUGDQFH ZLWK :$6+ 5(9 &2'( †  D FRS\ RI WKLV $PHQGHG

&RPSODLQWLVEHLQJVHUYHGRQWKH$WWRUQH\*HQHUDORI:DVKLQJWRQ
 

 &2817;,,,
9LRODWLRQRIWKH$UL]RQD&RQVXPHU)UDXG$FW
 $5,=5(967$7††et seq. ³$&)$´ 
2Q%HKDOIRI3ODLQWLII(QULTXH]DQGWKH$UL]RQD6XEFODVV 

 3ODLQWLIIVLQFRUSRUDWHWKHDERYHDOOHJDWLRQVE\UHIHUHQFH

 3ODLQWLII (QULTXH] DVVHUWV WKLV FODLP RQ EHKDOI RI KLPVHOI DQG WKH $UL]RQD

6XEFODVV


  7KLV FDXVH RI DFWLRQ LV EURXJKW SXUVXDQW WR WKH $&)$ ZKLFK SURYLGHV LQ

 SHUWLQHQWSDUW

 7KHDFWXVHRUHPSOR\PHQWE\DQ\SHUVRQRIDQ\GHFHSWLRQGHFHSWLYHRUXQIDLUDFW
RUSUDFWLFHIUDXGIDOVHSUHWHQVHIDOVHSURPLVHPLVUHSUHVHQWDWLRQRUFRQFHDOPHQW
 VXSSUHVVLRQ RU RPLVVLRQ RI DQ\ PDWHULDO IDFW ZLWK LQWHQW WKDW RWKHUV UHO\ RQ VXFK
FRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQLQFRQQHFWLRQZLWKWKHVDOHRUDGYHUWLVHPHQW
 RIDQ\PHUFKDQGLVHZKHWKHURUQRWDQ\SHUVRQKDVLQIDFWEHHQPLVOHGGHFHLYHGRU
GDPDJHGWKHUHE\LVGHFODUHGWREHDQXQODZIXOSUDFWLFH

$UL]5HY6WDW†




7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 77 of 101


  3ODLQWLII(QULTXH]DQGPHPEHUVRIWKH&ODVVDUHSHUVRQVDVGHILQHGE\$5,=

 5(967$7†  1LQWHQGRLVHQJDJHGLQWKH³VDOH´RI³PHUFKDQGLVH´DVGHILQHGE\

 $5,=5(967$7†  

  1LQWHQGRHQJDJHGLQGHFHSWLYHDQGXQIDLUDFWVDQGSUDFWLFHVPLVUHSUHVHQWDWLRQ

 DQG WKH FRQFHDOPHQW VXSSUHVVLRQ DQG RPLVVLRQ RI PDWHULDO IDFWV LQ FRQQHFWLRQ ZLWK WKH VDOH

 DQG DGYHUWLVHPHQW RI ³PHUFKDQGLVH´ DV GHILQHG LQ WKH $&)$  LQ YLRODWLRQ RI WKH $&)$ E\

 PLVUHSUHVHQWLQJ WKH TXDOLW\ DQG SHUIRUPDQFH RI WKH 6ZLWFK DQG -R\&RQV GHVSLWH NQRZLQJ RI

 WKH'ULIW'HIHFWDQGRUE\FRQFHDOLQJDQGRPLWWLQJGLVFORVXUHRIWKH'ULIW'HIHFWWR3ODLQWLII

 DQGWKH$UL]RQD6XEFODVVPHPEHUV

  1LQWHQGR


V IDLOXUH WR GLVFORVH 'ULIW 'HIHFW FRQVWLWXWHV GHFHSWLYH DQGRU XQIDLU

 DFWV RU SUDFWLFHV EHFDXVH LW NQHZ WKH GHIHFW ZRXOG D  EH XQNQRZQ WR DQG QRW HDVLO\

 GLVFRYHUDEOHE\3ODLQWLII(QULTXH]DQGWKH$UL]RQD6XEFODVVDQG E GHIHDW3ODLQWLII(QULTXH]¶V

 DQG FODVV PHPEHUV¶ RUGLQDU\ IRUHVHHDEOH DQG UHDVRQDEOH H[SHFWDWLRQV FRQFHUQLQJ WKH

 SHUIRUPDQFHDQGRSHUDELOLW\RIWKH6ZLWFKDQG-R\&RQV

  1LQWHQGR LQWHQGHG WKDW 3ODLQWLII DQG FODVV PHPEHUV UHO\ RQ LWV GHFHSWLYH DQG

 XQIDLU DFWV DQG SUDFWLFHV PLVUHSUHVHQWDWLRQVDQGWKHFRQFHDOPHQWVXSSUHVVLRQDQGRPLVVLRQ

 RIPDWHULDOIDFWVLQFRQQHFWLRQZLWKRIIHULQJWKH6ZLWFKDQG-R\&RQVIRUVDOHLQYLRODWLRQRI

 WKH$)&$

  1LQWHQGR¶VZURQJIXOSUDFWLFHVRFFXUUHGLQWKHFRXUVHRIWUDGHRUFRPPHUFH

  1LQWHQGR¶V ZURQJIXO SUDFWLFHV ZHUH DQG DUH LQMXULRXV WR WKH SXEOLF LQWHUHVW

 EHFDXVH WKRVHSUDFWLFHVZHUHSDUWRID JHQHUDOL]HG FRXUVHRIFRQGXFWRQWKHSDUWRI1LQWHQGR

 WKDWDSSOLHGWRDOOFODVVPHPEHUVDQGZHUHUHSHDWHGFRQWLQXRXVO\$OOFODVVPHPEHUVKDYHEHHQ



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 78 of 101


 DGYHUVHO\ DIIHFWHG E\ 1LQWHQGR¶V FRQGXFW DQG WKH SXEOLF ZDV DQG UHPDLQV DW ULVN DV D UHVXOW

 WKHUHRI

  $V D UHVXOW RI 1LQWHQGR¶V ZURQJIXO FRQGXFW 3ODLQWLII DQG $UL]RQD 6XEFODVV

 PHPEHUV ZHUH LQMXUHG  3ODLQWLII (QULTXH] DQG $UL]RQD 6XEFODVV PHPEHUV VXIIHUHG

 DVFHUWDLQDEOH ORVV DV D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V XQIDLU DQG GHFHSWLYH DFWV RU

 SUDFWLFHV+DG3ODLQWLII(QULTXH]DQG$UL]RQD6XEFODVVPHPEHUVNQRZQWKDWWKH-R\&RQVZHUH

 GHIHFWLYH WKH\ ZRXOG QRW KDYH SXUFKDVHG D 6ZLWFK FRQVROH RU VHSDUDWH VHWV RI -R\&RQV RU

 ZRXOG KDYH SDLG VLJQLILFDQWO\ OHVV IRU WKHP $PRQJ RWKHU LQMXULHV 3ODLQWLII (QULTXH] DQG

 $UL]RQD 6XEFODVV PHPEHUV RYHUSDLG IRU WKHLU 6ZLWFK DQG -R\&RQV ZKLFK VXIIHUHG D

 GLPLQXWLRQLQYDOXH

  3ODLQWLIIDQGWKH$UL]RQD6XEFODVVVHHNDFWXDOGDPDJHVFRPSHQVDWRU\SXQLWLYH

 GDPDJHV LQMXQFWLYH UHOLHI DQG FRXUW FRVWV DQG DWWRUQH\V


 IHHV DV D UHVXOW RI 1LQWHQGR¶V

 YLRODWLRQVRIWKH$)&$


&2817;,9
 9,2/$7,212)7+(,'$+2&21680(53527(&7,21$&7
,'$+2&2'(††et seq. ³,'&3$´ 
 2Q%HKDOIRI3ODLQWLII5HHGDQGWKH,GDKR6XEFODVV 
 3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ

 7KLVFODLPLVEURXJKWE\3ODLQWLII5HHGRQEHKDOIRIWKH,GDKR6XEFODVV

 1LQWHQGRLVD³SHUVRQ´XQGHUWKH,'&3$,'$+2&2'(†  

 1LQWHQGR¶VDFWVRUSUDFWLFHVDVVHWIRUWKDERYHRFFXUUHGLQWKHFRQGXFWRI³WUDGH´

RU³FRPPHUFH´XQGHU,'$+2&2'(†  

 1LQWHQGR SDUWLFLSDWHG RU HQJDJHG LQ PLVOHDGLQJ IDOVH RU GHFHSWLYH DFWV WKDW

YLRODWHG WKH ,'&3$ %\ ZLOOIXOO\ IDLOLQJ WR GLVFORVH DQG DFWLYHO\ FRQFHDOLQJ WKH 'ULIW 'HIHFW

1LQWHQGR HQJDJHG LQ GHFHSWLYH EXVLQHVV SUDFWLFHV SURKLELWHG E\ WKH ,'&3$ LQFOXGLQJ  

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 79 of 101


 UHSUHVHQWLQJWKDWWKH6ZLWFKHVDQG-R\&RQVKDYHFKDUDFWHULVWLFVXVHVDQGEHQHILWVZKLFKWKH\

 GR QRW KDYH   UHSUHVHQWLQJ WKDW WKH 6ZLWFKHV DQG -R\&RQV DUH RI D SDUWLFXODU VWDQGDUG

 TXDOLW\DQGJUDGHZKHQWKH\DUHQRW  DGYHUWLVLQJWKH6ZLWFKHVDQG-R\&RQVZLWKWKHLQWHQW

 QRWWRVHOOWKHPDVDGYHUWLVHG  HQJDJLQJLQDFWVRUSUDFWLFHVZKLFKDUHRWKHUZLVHPLVOHDGLQJ

 IDOVH RU GHFHSWLYH WR FRQVXPHUV DQG   HQJDJLQJ LQ DQ\ XQFRQVFLRQDEOH PHWKRG DFW RU

 SUDFWLFHLQWKHFRQGXFWRIWUDGHRUFRPPHUFHSee,'$+2&2'(†

  ,Q WKH FRXUVH RI LWV EXVLQHVV 1LQWHQGR ZLOOIXOO\ IDLOHG WR GLVFORVH DQG DFWLYHO\

 FRQFHDOHG WKH 'ULIW 'HIHFW DV GLVFXVVHG KHUHLQ DQG RWKHUZLVH HQJDJHG LQ DFWLYLWLHV ZLWK D

 WHQGHQF\ RU FDSDFLW\ WR GHFHLYH 1LQWHQGR DOVR HQJDJHG LQ XQODZIXO WUDGH SUDFWLFHV E\

 HPSOR\LQJ GHFHSWLRQ GHFHSWLYH DFWV RU SUDFWLFHV IUDXG RU FRQFHDOPHQW VXSSUHVVLRQ RU

 RPLVVLRQRIDQ\PDWHULDOIDFWZLWKLQWHQWWKDWRWKHUVUHO\XSRQVXFKFRQFHDOPHQWVXSSUHVVLRQRU

 RPLVVLRQLQFRQQHFWLRQZLWKWKHVDOHRI6ZLWFKHVDQG-R\&RQV

  1LQWHQGR¶V XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV ZHUH OLNHO\ WR DQG GLG LQ IDFW

 GHFHLYHUHDVRQDEOHFRQVXPHUVLQFOXGLQJ3ODLQWLII5HHGDQGWKHRWKHU,GDKR6XEFODVVPHPEHUV

 DERXWWKHWUXHSHUIRUPDQFHRI6ZLWFKHVDQG-R\&RQVWKHTXDOLW\RIWKH1LQWHQGREUDQGDQGWKH

 WUXHYDOXHRIWKH6ZLWFKHVDQG-R\&RQV

  1LQWHQGRNQHZRUVKRXOGKDYHNQRZQWKDWLWVFRQGXFWYLRODWHGWKH,'&3$

  1LQWHQGR RZHG 3ODLQWLII 5HHG D GXW\ WR GLVFORVH WKH 'ULIW 'HIHFW EHFDXVH

 1LQWHQGR

 D 3RVVHVVHG H[FOXVLYH NQRZOHGJH WKDW WKH -R\&RQV DUH SODJXHG ZLWK WKH
 'ULIW'HIHFWDQGGLGQRWSHUIRUPDVDGYHUWLVHG

E ,QWHQWLRQDOO\ FRQFHDOHG WKH IRUHJRLQJ IURP 3ODLQWLII 5HHG DQG WKH FODVV
 DQGRU

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 80 of 101


 F 0DGH LQFRPSOHWH UHSUHVHQWDWLRQV DERXW WKH TXDOLW\ DQG SHUIRUPDQFH RI
 WKH 6ZLWFKHV DQG-R\&RQVJHQHUDOO\DQGWKH'ULIW'HIHFWLQSDUWLFXODU
 ZKLOHSXUSRVHIXOO\ZLWKKROGLQJPDWHULDOIDFWVIURP3ODLQWLII5HHGDQGWKH
 FODVVWKDWFRQWUDGLFWHGWKHVHUHSUHVHQWDWLRQV
  %HFDXVH 1LQWHQGR IUDXGXOHQWO\ FRQFHDOHG WKH 'ULIW 'HIHFW DQG WKH WUXH
 SHUIRUPDQFH RI 6ZLWFKHV DQG -R\&RQV WKH YDOXH RI WKH 6ZLWFKHV DQG -R\&RQV KDV JUHDWO\

 GLPLQLVKHG ,Q OLJKW RI WKH QHFHVVLW\ IRU FRQWLQXHG DQG IXWXUH UHSDLUV DQG UHSODFHPHQWV WKH

 6ZLWFKHVDQG-R\&RQVDUHQRZZRUWKVLJQLILFDQWO\OHVVWKDQWKH\RWKHUZLVHZRXOGEH

  1LQWHQGR¶VIUDXGXOHQWRPLVVLRQVUHODWLQJWRWKH6ZLWFKHVDQG-R\&RQVWKH'ULIW
 'HIHFWDQGWKHWUXHSHUIRUPDQFHRI6ZLWFKHVDQG-R\&RQVZHUHPDWHULDOWR3ODLQWLII5HHGDQG

 WKH,GDKRFODVVPHPEHUV3ODLQWLII5HHGDQGWKH,GDKR&ODVVVXIIHUHGDVFHUWDLQDEOHORVVFDXVHG

 E\1LQWHQGR¶VFRQFHDOPHQWRIDQGIDLOXUHWRGLVFORVHPDWHULDOLQIRUPDWLRQ&ODVVPHPEHUVZKR

 SXUFKDVHGWKH6ZLWFKHVDQG-R\&RQVHLWKHUZRXOGKDYHSDLGOHVVIRUWKHPRUZRXOGQRWKDYH

 SXUFKDVHGWKHPDWDOOEXWIRU1LQWHQGR¶VYLRODWLRQVRIWKH,'&3$

  1LQWHQGR KDG DQ RQJRLQJ GXW\ WR DOO 1LQWHQGR FXVWRPHUV WR UHIUDLQ IURP XQIDLU
 DQG GHFHSWLYH SUDFWLFHV XQGHU WKH ,'&3$ $OO RZQHUV RI 6ZLWFKHV DQG -R\&RQV VXIIHUHG

 DVFHUWDLQDEOH ORVV LQ WKH IRUP RI WKH GLPLQLVKHG YDOXH DV DUHVXOW RI 1LQWHQGR¶V GHFHSWLYH DQG

 XQIDLUDFWVDQGSUDFWLFHVPDGHLQWKHFRXUVHRI1LQWHQGR¶VEXVLQHVV

  1LQWHQGR¶VYLRODWLRQVSUHVHQWDFRQWLQXLQJULVNWR3ODLQWLII5HHGDVZHOODVWRWKH


 JHQHUDO SXEOLF 1LQWHQGR¶V XQODZIXO DFWV DQG SUDFWLFHV FRPSODLQHG RI KHUHLQ DIIHFW WKH SXEOLF

 LQWHUHVW

  $VDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VYLRODWLRQVRIWKH,'&3$3ODLQWLII


 5HHGDQGWKH,GDKR6XEFODVVKDYHVXIIHUHGLQMXU\LQIDFWDQGRUDFWXDOGDPDJH

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 81 of 101


  3XUVXDQWWR,'$+2 &2'(†3ODLQWLII5HHGLQGLYLGXDOO\DQGRQEHKDOIRI

 WKH,GDKR6XEFODVVVHHNVPRQHWDU\UHOLHIDJDLQVW1LQWHQGRPHDVXUHGDVWKHJUHDWHURI D DFWXDO

 GDPDJHV LQ DQ DPRXQW WR EH GHWHUPLQHG DW WULDO DQG E  VWDWXWRU\ GDPDJHV LQ WKH DPRXQW RI

 IRU3ODLQWLII5HHGDQGHDFK,GDKR6XEFODVVPHPEHU

  3ODLQWLII5HHGDOVRVHHNVDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQIDLUXQODZIXODQGRU

 GHFHSWLYH SUDFWLFHV DWWRUQH\V¶ IHHV SXUVXDQW WR ,'$+2 &2'( †    DQG DQ\ RWKHU MXVW

 DQGSURSHUUHOLHIDYDLODEOHXQGHUWKH,'&3$.

  3ODLQWLII5HHGDOVRVHHNVSXQLWLYHGDPDJHVDJDLQVW1LQWHQGREHFDXVH1LQWHQGR¶V

 FRQGXFW HYLGHQFHV DQ H[WUHPH GHYLDWLRQ IURP UHDVRQDEOH VWDQGDUGV DQG LWV FRQGXFW 1LQWHQGR

 UHSHDWHGO\IODJUDQWO\PDOLFLRXVO\DQGIUDXGXOHQWO\RPLWWHGWKHWUXWKDERXWWKHSHUIRUPDQFHRI

 WKH6ZLWFKHVDQG-R\&RQVDVZHOODVWKH'ULIW'HIHFWDQGLWFRQFHDOHGPDWHULDOIDFWVWKDWRQO\

 WKH\NQHZ1LQWHQGR¶VXQODZIXOFRQGXFWFRQVWLWXWHVPDOLFHRSSUHVVLRQDQGIUDXGZDUUDQWLQJ

 SXQLWLYHGDPDJHVSXUVXDQWWR,'$+2&2'(†  

  )XUWKHUPRUH LQ DGGLWLRQ WR WKH UHPHGLHV DYDLODEOH XQGHU ,'$+2 &2'( † 

   HDFKHOGHUO\DQGGLVDEOHGSHUVRQFRPSULVLQJWKH,GDKR6XEFODVVZKRZDVYLFWLPL]HGE\

 1LQWHQGR¶VFRQGXFWDOOHJHGKHUHLQLVHQWLWOHGWRDQHQKDQFHGSHQDOW\RIWKHJUHDWHURIRU

 WUHEOHGGDPDJHV,'$+2&2'(†  

 &2817;9
9,2/$7,212)7+(2./$+20$
 &21680(53527(&7,21$&7
2./$67$7WLW††et seq. ³2&3$´ 
 2Q%HKDOIRI3ODLQWLII+RHOVFKHUDQGWKH2NODKRPD6XEFODVV 

  3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ

  7KLVFODLPLVEURXJKWE\3ODLQWLII+RHOVFKHURQEHKDOIRIWKH2NODKRPD6XEFODVV



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 82 of 101


  3ODLQWLII +RHOVFKHU DQG PHPEHUV RI WKH 2NODKRPD FODVV DUH SHUVRQV ZLWKLQ WKH

 PHDQLQJRIWKH2&3$

  1LQWHQGRLVD³SHUVRQ´ZLWKLQWKHPHDQLQJRIWKH2&3$IRUDOOSXUSRVHVWKHUHLQ

 DQGWKH6ZLWFKHVDQG-R\&RQVDUH³JRRGV´XQGHUWKH2&3$

  3ODLQWLII +RHOVFKHU DQG &ODVV PHPEHUV DUH ³SHUVRQV´ HQWLWOHG WR EULQJ D FODLP

 SXUVXDQWWRWKH2&3$

  7KHDGYHUWLVLQJRIIHULQJIRUVDOHDQGVDOHRI6ZLWFKHVDQG-R\&RQVFRQVWLWXWHV

 WUDGHRUFRPPHUFHXQGHUWKH2&3$

  ,Q DGYHUWLVLQJ DQG VHOOLQJ 6ZLWFKHV DQG -R\&RQV FRQWDLQLQJ WKH 'ULIW 'HIHFW

 1LQWHQGR YLRODWHG DQG FRQWLQXHV WR YLRODWH WKH 2&3$ E\ HQJDJLQJ LQ WKH IROORZLQJ

 XQFRQVFLRQDEOHIDOVHPLVOHDGLQJRUGHFHSWLYHDFW V RUSUDFWLFH V ZKLFKZHUHIDOVHRUKDGWKH

 FDSDFLW\WRGHFHLYH

 D 0DNLQJDIDOVHUHSUHVHQWDWLRQRURPLVVLRQVNQRZLQJO\RUZLWKUHDVRQWR

 NQRZDVWRWKHFKDUDFWHULVWLFVLQJUHGLHQWVXVHVEHQHILWVDOWHUDWLRQVRU

 TXDQWLWLHVRIWKHVXEMHFWRIDFRQVXPHUWUDQVDFWLRQ

 E 5HSUHVHQWLQJ NQRZLQJO\ RU ZLWK UHDVRQ WR NQRZ WKDW WKH VXEMHFW RI D

 FRQVXPHUWUDQVDFWLRQLVRIDSDUWLFXODUVWDQGDUGVW\OHRUPRGHOLILWLVRI

 DQRWKHURURPLWWLQJLQIRUPDWLRQDERXWWKHVDPHDQG

 F $GYHUWLVLQJ NQRZLQJO\ RU ZLWK UHDVRQ WR NQRZ WKH VXEMHFW RI D

 FRQVXPHUWUDQVDFWLRQZLWKLQWHQWQRWWRVHOOLWDVDGYHUWLVHG

  1LQWHQGR KDV YLRODWHG WKH 2&3$ E\ FRPPLWWLQJ XQIDLU RU GHFHSWLYH WUDGH

 SUDFWLFHVDVGHILQHGLQ2./$ 67$7WLW†DQGHQXPHUDWHGXQGHU2./$ 67$7WLW†

 

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 83 of 101


  %\ HQJDJLQJ LQ WKH IRUHJRLQJ FRQGXFW 1LQWHQGR WRRN DGYDQWDJH RI 3ODLQWLII

 +RHOVFKHUDQGFODVVPHPEHUV¶ODFNRINQRZOHGJHWRDQXQIDLUGHJUHH

  3ODLQWLII +RHOVFKHU DQG FODVV PHPEHUV VXVWDLQHG DFWXDO GDPDJHV EHFDXVH WKH\

 SXUFKDVHG GHIHFWLYH 6ZLWFKHV DQG -R\&RQV DQG UHFHLYHG OHVV WKDQ ZKDW WKH\ ZHUHHQWLWOHG WR

 UHFHLYH IURP WKH SXUFKDVH RI 6ZLWFKHV DQG -R\&RQV DV ZHOO DV LQFXUULQJ FRVWV WR DWWHPSW WR

 UHPHG\WKH'ULIW'HIHFW

  +DG 1LQWHQGR QRW HQJDJHG LQ WKH IDOVH PLVOHDGLQJ RU GHFHSWLYH FRQGXFW

 GHVFULEHG KHUHLQ 3ODLQWLII +RHOVFKHU DQG &ODVV PHPEHUV ZRXOG QRW KDYH SXUFKDVHG WKHLU

 6ZLWFKHV DQG -R\&RQV RU ZRXOG KDYH SDLG VLJQLILFDQWO\ OHVV IRU WKHP  DQG ZRXOG QRW KDYH

 LQFXUUHGRXWRISRFNHWFRVWVWRDWWHPSWWRUHPHG\WKH'ULIW'HIHFW

  %\ UHDVRQ RI WKH XQODZIXO DFWV HQJDJHG LQ E\ 1LQWHQGR DQG DV D GLUHFW DQG

 SUR[LPDWH UHVXOW WKHUHRI 3ODLQWLII +RHOVFKHU DQG &ODVV PHPEHUV KDYH VXIIHUHG DVFHUWDLQDEOH

 ORVVDQGGDPDJHV

  1LQWHQGR¶V VDOH RI GHIHFWLYH 6ZLWFKHV DQG -R\&RQV FRXSOHG ZLWK 1LQWHQGR¶V

 XQFRQVFLRQDEOH DQG GHFHSWLYH DFWV DQG SUDFWLFHV LQ FRQQHFWLRQ WKHUHZLWK²QDPHO\ RPLWWLQJ

 PDWHULDOLQIRUPDWLRQUHJDUGLQJWKH'ULIW'HIHFW²ZDVDQGLVUHFNOHVVVKRZVVSLWHRULOOZLOORU

 GHPRQVWUDWHVDUHFNOHVVLQGLIIHUHQFHWRWKHLQWHUHVWVRIFRQVXPHUV

  3ODLQWLII+RHOVFKHUGHPDQGVMXGJPHQWDJDLQVW1LQWHQGRIRUDFWXDOGDPDJHVSOXV

 FRVWVDQGDWWRUQH\¶VIHHVLQFXUUHGLQEULQJLQJWKLVDFWLRQDVSURYLGHGIRULQ2./$ 67$7WLW

 †$

  ,Q DGGLWLRQ 3ODLQWLII +RHOVFKHU SUD\V IRU DQ DZDUG RI D FLYLO SHQDOW\ DJDLQVW

 1LQWHQGRLQWKHDPRXQWRISHUYLRODWLRQSXUVXDQWWR2./$ 67$7WLW†%

 GXHWR1LQWHQGR¶VNQRZLQJDQGZLOOIXOXQFRQVFLRQDEOHFRQGXFW

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 84 of 101


 &2817;9,
9,2/$7,2162)7+(0,&+,*$1&21680(53527(&7,21$&7
 0,&+&203/$:6†et seq. ³0&3$´ 
2Q%HKDOIRI3ODLQWLII$LQVZRUWKDQGWKH0LFKLJDQ6XEFODVV 
 
 3ODLQWLIIVLQFRUSRUDWHWKHDERYHDOOHJDWLRQVE\UHIHUHQFH

 3ODLQWLII $LQVZRUWK EULQJV WKLV FODLP RQ EHKDOI RI KLPVHOI DQG WKH 0LFKLJDQ

6XEFODVV

 3ODLQWLII $LQVZRUWK 0LFKLJDQ 6XEFODVV PHPEHUV DQG 1LQWHQGR DUH ³SHUVRQV´

ZLWKLQWKHPHDQLQJRIWKH0&3$

 1LQWHQGRHQJDJHGLQWUDGHSUDFWLFHVSURKLELWHGE\WKH0&3$LQFOXGLQJ

D †  F  UHSUHVHQWLQJ WKDW JRRGV RU VHUYLFHV KDYH FKDUDFWHULVWLFV

WKDWWKH\GRQRWKDYH

E †  H  UHSUHVHQWLQJ WKDW JRRGV RU VHUYLFHV DUH RI D SDUWLFXODU

VWDQGDUGLIWKH\DUHRIDQRWKHU

F †  V  IDLOLQJ WR UHYHDO D PDWHULDO IDFW WKH RPLVVLRQ RI ZKLFK

WHQGVWRPLVOHDGRUGHFHLYHWKHFRQVXPHUDQGZKLFKIDFWFRXOGQRWUHDVRQDEO\EHNQRZQE\

WKHFRQVXPHU

G †  EE  PDNLQJ D UHSUHVHQWDWLRQ RI IDFW RU VWDWHPHQW RI IDFW

PDWHULDOWRWKHWUDQVDFWLRQVXFKWKDWDSHUVRQUHDVRQDEO\EHOLHYHVWKHUHSUHVHQWHGRUVXJJHVWHG

VWDWHRIDIIDLUVWREHRWKHUWKDQLWDFWXDOO\LVDQG

H †  FF  IDLOLQJ WR UHYHDO IDFWV ZKLFK DUH PDWHULDO WR WKH

WUDQVDFWLRQLQOLJKWRIUHSUHVHQWDWLRQVRIIDFWPDGHLQDSRVLWLYHPDQQHU

 %\VHOOLQJWKHGHIHFWLYH6ZLWFKHVDQG-R\&RQVZLWKH[FOXVLYHNQRZOHGJHRIWKH

'ULIW 'HIHFW DQG E\ WKH TXDOLW\ RI WKH 6ZLWFKHV DQG -R\&RQV ZKLOH IDLOLQJ WR GLVFORVH DQG


7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 85 of 101


 DFWLYHO\ FRQFHDOLQJ WKH -R\&RQV¶ GHIHFWLYH QDWXUH 1LQWHQGR HQJDJHG LQ GHFHSWLYH SUDFWLFHV

 WKDWYLRODWH0LFKLJDQODZ

  1LQWHQGRHQJDJHGLQWKHVHGHFHSWLYHSUDFWLFHVZLWKWKHLQWHQWWKDWFRQVXPHUVOLNH

 3ODLQWLII $LQVZRUWK ZRXOG UHO\ RQ 1LQWHQGR¶V UHSUHVHQWDWLRQV DQG RPLVVLRQV ZKHQ GHFLGLQJ

 ZKHWKHUWRSXUFKDVHWKHLU6ZLWFKHVDQG-R\&RQV

  3ODLQWLII$LQVZRUWKDQG0LFKLJDQ6XEFODVVPHPEHUVVXIIHUHGDVFHUWDLQDEOHORVV

 DV D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V GHFHSWLYH DFWV RU SUDFWLFHV +DG 3ODLQWLII

 $LQVZRUWK DQG 0LFKLJDQ 6XEFODVVPHPEHUV NQRZQ WKDW WKH 6ZLWFKHVDQG -R\&RQV FRQWDLQ D

 ODWHQW GHIHFW WKH\ ZRXOG QRW KDYH SXUFKDVHG WKHP RU ZRXOG KDYH SDLG VLJQLILFDQWO\ OHVV IRU

 WKHP$PRQJRWKHULQMXULHV3ODLQWLII$LQVZRUWKDQG0LFKLJDQ6XEFODVVPHPEHUVRYHUSDLGIRU

 WKHLU6ZLWFKHVDQG-R\&RQVDQGWKHLU6ZLWFKHVDQG-R\&RQVVXIIHUHGDGLPLQXWLRQLQYDOXH

  $FFRUGLQJO\ 3ODLQWLII $LQVZRUWK DQG 0LFKLJDQ 6XEFODVV PHPEHUV VHHN DFWXDO

 GDPDJHVSXQLWLYHGDPDJHVUHDVRQDEOHDWWRUQH\V¶IHHVDQGFRVWVDQGDOORWKHUUHOLHISHUPLWWHG

 XQGHUWKH0&3$


&2817;9,,
 9,2/$7,2162)7+(25(*2181/$:)8/75$'(35$&7,&(6$&7
255(967$7††et seq. ³2873$´ 
 2Q%HKDOIRI3ODLQWLII&RIIH\:ROIJDQJDQGWKH2UHJRQ6XEFODVV 

  3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ

  7KLVFODLPLVEURXJKWE\WKH3ODLQWLII&RIIH\:ROIJDQJRQEHKDOIRIWKH2UHJRQ

 6XEFODVV

  1LQWHQGR LV HQJDJHG LQ D ³WUDGH´ DQG ³FRPPHUFH´ ZLWKLQ WKH PHDQLQJ RI 25

 5(967$7†  



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 86 of 101


  1LQWHQGR LV D ³SHUVRQ´ ZLWKLQ WKH PHDQLQJ RI 25 5(9 67$7 ††   

 DQG

  3ODLQWLII¶V DQG HDFK DQG HYHU\ FODVV PHPEHUV¶ SXUFKDVH RI 6ZLWFKHV DQG -R\

 &RQVFRQVWLWXWHD³VDOH´ZLWKLQWKHPHDQLQJRI255(967$7†

  1LQWHQGRKDVDGYHUWLVHGZLWKLQWKHPHDQLQJRI255(967$7†

  7KHDFWVDQGSUDFWLFHVRI1LQWHQGRDVGHVFULEHGKHUHLQZHUHLQWHQGHGWRUHVXOWLQ

 WKHVDOHRI6ZLWFKHVDQG-R\&RQVWR3ODLQWLIIDQGFODVVPHPEHUV

  1LQWHQGR KDV HQJDJHG LQ XQFRQVFLRQDEOH WDFWLFV IDOVH DGYHUWLVLQJ GHFHSWLYH

 SUDFWLFHV XQODZIXO PHWKRGV RI FRPSHWLWLRQ DQGRU XQIDLU DFWV DV GHILQHG LQ WKH 2873$

 LQFOXGLQJ WKH RPLVVLRQ RI WKH 'ULIW 'HIHFW WR WKH GHWULPHQW RI 3ODLQWLII DQG FODVV PHPEHUV

 1LQWHQGR¶VXQFRQVFLRQDEOHWDFWLFVDQGGHFHSWLYHSUDFWLFHVKDYHEHHQLQWHQWLRQDOO\NQRZLQJO\

 DQGXQODZIXOO\SHUSHWUDWHGXSRQ3ODLQWLIIDQGFODVVPHPEHUV

  6SHFLILFDOO\ XQGHU 6HFWLRQ  1LQWHQGR KDV YLRODWHG WKH IROORZLQJ

 SURYLVLRQVRIWKH2873$

 x  H  5HSUHVHQWV WKDW UHDO HVWDWH JRRGV RU VHUYLFHV KDYH VSRQVRUVKLS

 DSSURYDO FKDUDFWHULVWLFV LQJUHGLHQWV XVHV EHQHILWV TXDQWLWLHV RU TXDOLWLHV

 WKDW WKH UHDO HVWDWH JRRGV RU VHUYLFHV GR QRW KDYH RU WKDW D SHUVRQ KDV D

 VSRQVRUVKLS DSSURYDO VWDWXV TXDOLILFDWLRQ DIILOLDWLRQ RU FRQQHFWLRQ WKDW

 WKHSHUVRQGRHVQRWKDYH

 x  J  5HSUHVHQWV WKDW UHDO HVWDWH JRRGV RU VHUYLFHV DUH RI D SDUWLFXODU
 VWDQGDUG TXDOLW\ RU JUDGH RU WKDW UHDO HVWDWH RU JRRGV DUH RI D SDUWLFXODU
 VW\OHRUPRGHOLIWKHUHDOHVWDWHJRRGVRUVHUYLFHVDUHRIDQRWKHU


7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 87 of 101


 x  L $GYHUWLVHVUHDOHVWDWHJRRGVRUVHUYLFHVZLWKLQWHQWQRWWRSURYLGHWKH

 UHDOHVWDWHJRRGVRUVHUYLFHVDVDGYHUWLVHGDQG

 x  X  (QJDJHV LQ DQ\ RWKHU XQIDLU RU GHFHSWLYH FRQGXFW LQ WUDGH RU
 FRPPHUFH255(967$7†  
  1LQWHQGR¶V XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV ZHUH OLNHO\ WR DQG GLG LQ IDFW
 GHFHLYHUHDVRQDEOHFRQVXPHUVLQFOXGLQJ3ODLQWLIIDQGPHPEHUVRIWKH2UHJRQ6XEFODVVDERXW

 WKHTXDOLW\SHUIRUPDQFHDQGWUXHYDOXHRIWKHGHIHFWLYH6ZLWFKHVDQG-R\&RQV

  1LQWHQGR LQWHQWLRQDOO\ DQG NQRZLQJO\ PLVUHSUHVHQWHG FRQFHDOHG RU RPLWWHG


 PDWHULDOIDFWVUHJDUGLQJWKH'ULIW'HIHFW

  1LQWHQGR RZHG 3ODLQWLII &RIIH\:ROIJDQJ DQG WKH 2UHJRQ 6XEFODVV D GXW\ WR
 GLVFORVH WKH 'ULIW 'HIHFW EHFDXVH LW SRVVHVVHG H[FOXVLYH NQRZOHGJH RI LW LQWHQWLRQDOO\

 FRQFHDOHG WKH GHIHFW DQGRU PDGH LQFRPSOHWH IDOVH RU PLVOHDGLQJ UHSUHVHQWDWLRQV DERXW WKH

 6ZLWFKHV DQG -R\&RQV ZKLOH SXUSRVHIXOO\ ZLWKKROGLQJ PDWHULDO IDFWV IURP 3ODLQWLII DQG WKH

 2UHJRQ6XEFODVVWKDWFRQWUDGLFWHGWKHVHUHSUHVHQWDWLRQV

  1LQWHQGR¶V GHFHSWLYH DQG XQIDLU DFWLRQV DOOHJHG KHUHLQ ZHUH UHFNOHVV DQG
 XQGHUWDNHQE\1LQWHQGRNQRZLQJO\

  $VDUHVXOWRI1LQWHQGR¶DFWLRQV3ODLQWLII&RIIH\:ROIJDQJDQGFODVVPHPEHUV


 KDYHLQFXUUHGHFRQRPLFGDPDJHVLQFOXGLQJEXWQRWOLPLWHGWRFRVWVIRUUHSDLUVDQGRWKHURXW

 RISRFNHWORVVHVORVVXVHIXWXUHUHSDLUVDQGGLPLQLVKHGYDOXHRIWKHLU6ZLWFKHVDQG-R\&RQV

  +DG 3ODLQWLII NQRZQ DERXW WKH 'ULIW 'HIHFW 3ODLQWLII &RIIH\:ROIJDQJ ZRXOG
 QRWKDYHSDLGDVPXFKIRUWKH6ZLWFKDQG-R\&RQVRUZRXOGQRWKDYHSXUFKDVHGWKHPDWDOO





7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 88 of 101


  3ODLQWLII IXUWKHU VHHNV UHFRYHU\ RI DWWRUQH\V¶ IHHV FRVWV RI OLWLJDWLRQ SXQLWLYH

 GDPDJHV DQG RWKHU HTXLWDEOH UHOLHI DV GHWHUPLQHG E\ WKH FRXUW SXUVXDQW WR 25 5(9 67$7 †

 

 &2817;9,,,
9,2/$7,212)1<*(1%86/$:†
 2Q%HKDOIRI3ODLQWLII/L]DUGRDQGWKH1HZ<RUN6XEFODVV 

  3ODLQWLIIV UHDOOHJH DQG LQFRUSRUDWH E\ UHIHUHQFH DOO SDUDJUDSKV DV WKRXJK IXOO\

 VHWIRUWKKHUHLQ

  3ODLQWLII /L]DUGR EULQJV WKLV &RXQW RQ EHKDOI RI KLPVHOI DQG RQ EHKDOI RI WKH

 1HZ<RUNFODVVPHPEHUV

  3ODLQWLII /L]DUGR DQG FODVV PHPEHUV DUH ³SHUVRQV´ ZLWKLQ WKH PHDQLQJ RI WKH

 1HZ<RUN*HQHUDO%XVLQHVV/DZ ³*%/´ 1<*(1%86/$:† K 

  1LQWHQGR LV D ³SHUVRQ ILUP FRUSRUDWLRQ RU DVVRFLDWLRQ RU DJHQW RU HPSOR\HH

 WKHUHRI´ZLWKLQWKHPHDQLQJRIWKH*%/1<*(1%86/$:† E 

  8QGHU *%/ 6HFWLRQ  ³>G@HFHSWLYH DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\

 EXVLQHVVWUDGHRUFRPPHUFHRULQWKHIXUQLVKLQJRIDQ\VHUYLFHLQWKLVVWDWHDUHGHFODUHG

 XQODZIXO´1<*(1%86/$:† D 

  ,Q WKH FRXUVH RI EXVLQHVV WUDGH RU FRPPHUFH 1LQWHQGR ZLOOIXOO\ IDLOHG WR

 GLVFORVHDQGDFWLYHO\FRQFHDOHGWKH'ULIW'HIHFWDVGLVFXVVHGKHUHLQDQGRWKHUZLVHHQJDJHGLQ

 DFWLYLWLHV ZLWK D WHQGHQF\ RU FDSDFLW\ WR GHFHLYH 1LQWHQGR DOVR HQJDJHG LQ XQODZIXO WUDGH

 SUDFWLFHV E\ HPSOR\LQJ GHFHSWLRQ GHFHSWLYH DFWV RU SUDFWLFHV IUDXG RU FRQFHDOPHQW

 VXSSUHVVLRQ RU RPLVVLRQ RI DQ\ PDWHULDO IDFW ZLWK LQWHQW WKDW RWKHUV UHO\ XSRQ VXFK

 FRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQLQFRQQHFWLRQZLWKWKHVDOHRIGHIHFWLYH6ZLWFKHVDQG

 -R\&RQV

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 89 of 101


  1LQWHQGR NQHZ WKURXJK SUHUHOHDVH WHVWLQJ DQG LPPHGLDWH QHJDWLYH FRQVXPHU

 UHVSRQVHVIROORZLQJWKHUHOHDVHRIWKH6ZLWFKHVDQG-R\&RQVWKDWWKH-R\&RQVZHUHSODJXHG

 ZLWK WKH 'ULIW 'HIHFW DQG WKDW WKH 6ZLWFKHV DQG -R\&RQV GLG QRW SHUIRUP DV DGYHUWLVHG RU

 H[SHFWHG1LQWHQGRNQHZWKLVEHIRUHLWUHOHDVHGWKH6ZLWFKHVDQG-R\&RQVRUSULRUWRRIIHULQJ

 WKHPIRUVDOHWRFRQVXPHUVEXWFRQFHDOHGDOORIWKDWLQIRUPDWLRQ

  %\ IDLOLQJ WR GLVFORVH WKH 'ULIW 'HIHFW DQG DGYHUWLVLQJ WKH 6ZLWFKHV DQG -R\

 &RQV DV KLJK TXDOLW\ DQG E\ SUHVHQWLQJ LWVHOI DV D UHSXWDEOH YLGHR JDPH KDUGZDUH

 PDQXIDFWXUHU 1LQWHQGR HQJDJHG LQ GHFHSWLYH EXVLQHVV SUDFWLFHV LQ YLRODWLRQ RI *%/ 6HFWLRQ

 

  1LQWHQGR¶V GHFHSWLYH DFWV DQG FRQGXFW ZDV GLUHFWHG DW 3ODLQWLII /L]DUGR DQG

 RWKHUFRQVXPHUV1LQWHQGR¶VGHFHSWLYHDFWVDQGSUDFWLFHVZHUHFRQVXPHURULHQWHGEHFDXVHWKH\

 KDGDEURDGLPSDFWRQFRQVXPHUVDWODUJHDIIHFWLQJDOOSXUFKDVHUVRI6ZLWFKHVDQG-R\&RQV

  1LQWHQGR¶VGHFHSWLYHDFWVRUSUDFWLFHVZHUHPDWHULDOO\PLVOHDGLQJ1LQWHQGR¶V

 FRQGXFWZDVOLNHO\WRDQGGLGLQIDFWGHFHLYHUHDVRQDEOHFRQVXPHUVLQFOXGLQJ3ODLQWLII/L]DUGR

 DQG WKH RWKHU FODVV PHPEHUV DERXW WKH WUXH SHUIRUPDQFH RI WKH 6ZLWFKHV DQG -R\&RQV WKH

 TXDOLW\RIWKH1LQWHQGREUDQGWKHWUXHYDOXHRIWKH6ZLWFKHVDQG-R\&RQV

  7KHH[LVWHQFHRIWKHGHIHFWZDVPDWHULDOWR3ODLQWLII/L]DUGRDQGFODVVPHPEHUV

  1LQWHQGR LQWHQWLRQDOO\ DQG NQRZLQJO\ FRQFHDOHG PDWHULDO IDFWV UHJDUGLQJ WKH

 6ZLWFKHV DQG -R\&RQV ZLWK DQ LQWHQW WR PLVOHDG 3ODLQWLII /L]DUGR DQG WKH 1HZ <RUN FODVV

 PHPEHUV

  1LQWHQGRSRVVHVVHGH[FOXVLYHNQRZOHGJHWKDWLWZDVPDQXIDFWXULQJVHOOLQJDQG

 GLVWULEXWLQJ 6ZLWFKHV DQG -R\&RQV WKDW DUH SODJXHG ZLWK WKH 'ULIW 'HIHFW DQG WKDW GR QRW



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 90 of 101


 SHUIRUPDVDGYHUWLVHGDQGLWLQWHQWLRQDOO\FRQFHDOHGWKHIRUHJRLQJPDWHULDOIDFWVIURP3ODLQWLII

 /L]DUGRDQGPHPEHUVRIWKHFODVVZKRGLGQRWKDYHDFFHVVWRWKLVLQIRUPDWLRQ

  $FFRUGLQJO\3ODLQWLII/L]DUGRDQG1HZ<RUN&ODVVPHPEHUVZHUHXQDZDUHDQG

 GLG QRW KDYH UHDVRQDEOH PHDQV RI GLVFRYHULQJ WKH PDWHULDO IDFWV WKDW 1LQWHQGR IDLOHG WR

 GLVFORVH

  'XH WR WKH GHIHFW WKH YDOXH RI WKH 6ZLWFKHV DQG -R\&RQV KDV JUHDWO\

 GLPLQLVKHG$VLGHIURPWKHIDFWWKDWWKH6ZLWFKHVDQG-R\&RQVGRQRWIXQFWLRQSURSHUO\DQG

 FDQQRW EH XVHG IRU WKHLU FRUH SXUSRVH LH JDPLQJ  LQ OLJKW RI WKH VWLJPD DWWDFKHG WR WKH

 6ZLWFKHVDQG-R\&RQVWKH\DUHQRZZRUWKVLJQLILFDQWO\OHVVWKDQWKH\RWKHUZLVHZRXOGEH

  3ODLQWLII /L]DUGR DQG VLPLODUO\ VLWXDWHG FRQVXPHUV LQ 1HZ <RUN VXIIHUHG

 DVFHUWDLQDEOH ORVV FDXVHG E\ 1LQWHQGR¶V FRQFHDOPHQW RI DQG IDLOXUH WR GLVFORVH PDWHULDO

 LQIRUPDWLRQ 3ODLQWLII /L]DUGR DQG FODVV PHPEHUV ZKR SXUFKDVHG WKH 6ZLWFKHV DQG -R\&RQV

 HLWKHU ZRXOG KDYH SDLG OHVV IRU WKHP RU ZRXOG QRW KDYH SXUFKDVHG WKHP DW DOO 'XH WR

 1LQWHQGR¶V GHFHSWLYH RU XQIDLU FRQGXFW 3ODLQWLII /L]DUGR DQG WKH 1HZ <RUN FODVV PHPEHUV

 RYHUSDLGIRUWKHLU6ZLWFKHVDQG-R\&RQVDQGGLGQRWUHFHLYHWKHEHQHILWRIWKHLUEDUJDLQ

  $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V YLRODWLRQV RI WKH *%/ 6HFWLRQ

 3ODLQWLIIDQGWKHFODVVPHPEHUVLQ1HZ<RUNKDYHVXIIHUHGLQMXU\LQIDFWHQWLWOLQJWKHPWR

 UHFRYHU\RIGDPDJHVDQGDQRUGHUHQMRLQLQJ1LQWHQGR¶VZURQJIXOFRQGXFW

  1LQWHQGR¶V DFWV DQG SUDFWLFHV ZHUH ZLOOIXO DQG NQRZLQJ DQG 3ODLQWLII /L]DUGR

 DQG1HZ<RUNFODVVPHPEHUVDUHHQWLWOHGWRLQMXQFWLYHUHOLHIUHFRYHU\RIWKHJUHDWHURIDFWXDO

 GDPDJHV RU ILIW\ GROODUV SHU YLRODWLRQ WUHEOH GDPDJHV XS WR RQH WKRXVDQG GROODUV DQG

 UHDVRQDEOHFRVWVDQGDWWRUQH\V¶IHHVSee 1<*(1%86/$:† K 




7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 91 of 101



&2817;,;
 9,2/$7,212)7+($/$%$0$'(&(37,9(
75$'(35$&7,&(6$&7 $/$&2'(†et seq  ³$'73$´ 
 2Q%HKDOIRI3ODLQWLII&ROOLQVDQGWKH$ODEDPD6XEFODVV 
 3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ

 7KLV FODLP LV EURXJKW E\ WKH 3ODLQWLII &ROOLQV RQ EHKDOI RI WKH $ODEDPD

6XEFODVV

 1LQWHQGR¶V PLVUHSUHVHQWDWLRQV DV WRWKH TXDOLW\RI 6ZLWFKHV DQG -R\&RQV DQG

IDLOXUH WR GLVFORVH WKH 'ULIW 'HIHFW YLRODWHG WKH $'73$ LQ WKDW 1LQWHQGR UHSUHVHQWHG WKDW

JRRGV RU VHUYLFHV KDYH VSRQVRUVKLS DSSURYDO FKDUDFWHULVWLFV LQJUHGLHQWV XVHV EHQHILWV RU

TXDOLWLHVWKDWWKH\GRQRWKDYHRUWKDWDSHUVRQKDVVSRQVRUVKLSDSSURYDOVWDWXVDIILOLDWLRQRU

FRQQHFWLRQ WKDW KH RU VKH GRHV QRW KDYH UHSUHVHQWHG WKDW LWV SURGXFWV ZHUH RI D SDUWLFXODU

VWDQGDUGTXDOLW\DQGRUJUDGHZKHQWKH\ZHUHRIDQRWKHUDGYHUWLVHGJRRGVZLWKWKHLQWHQWQRW

WRVHOOWKHPDVDGYHUWLVHGDQGHQJDJLQJLQXQFRQVFLRQDEOHIDOVHPLVOHDGLQJRUGHFHSWLYHDFW

RUSUDFWLFHLQWKHFRQGXFWRIWUDGHRUFRPPHUFH

 1LQWHQGR¶V PLVUHSUHVHQWDWLRQV DQG RPLVVLRQV ZHUH PDWHULDO WR 3ODLQWLII DQG

FODVV PHPEHUV VXFK WKDW D UHDVRQDEOH SHUVRQ ZRXOG FRQVLGHU WKHP LPSRUWDQW LQ GHFLGLQJ

ZKHWKHUWRSXUFKDVH6ZLWFKHVDQGRU-R\&RQVDQGKDG3ODLQWLIIDQGFODVVPHPEHUVNQRZQWKH

WUXWKWKH\ZRXOGQRWKDYHSDLGDVPXFKIRUWKHP KDGWKH\ERXJKWWKHPDWDOO 

 $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V YLRODWLRQ RI WKH $'73$

3ODLQWLIIDQGFODVVPHPEHUVVXIIHUHGHFRQRPLFGDPDJHVLQFOXGLQJEXWQRWOLPLWHGWRSD\PHQW

IRU DGGLWLRQDO -R\&RQV SD\PHQW IRU UHSDLU RI -R\&RQV ORVV RI XVH DQG GHYDOXDWLRQ RI

6ZLWFKHVDQG-R\&RQVGXHWRWKH'ULIW'HIHFW




7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 92 of 101


  3XUVXDQWWR$/$&2'(†3ODLQWLIIDQGFODVVPHPEHUVDUHHQWLWOHGWRXS

 WRWKUHHWLPHVDFWXDOGDPDJHVDWWKHFRXUW¶VGLVFUHWLRQLQMXQFWLYHUHOLHIDQGFRVWVRIDFWLRQDQG

 DWWRUQH\V¶IHHV


&2817;;
 9LRODWLRQVRIWKH2KLR&RQVXPHU6DOHV3UDFWLFHV$FW
2+,25(9&2'($11††et seq ³2&63$´ 
 2Q%HKDOIRI3ODLQWLII:LOVRQDQGWKH2KLR6XEFODVV 

  3ODLQWLIIV UHSHDW UHDOOHJH DQG LQFRUSRUDWH E\ UHIHUHQFH HDFK RI WKH IRUHJRLQJ

 IDFWXDODOOHJDWLRQVDVWKRXJKIXOO\VHWIRUWKKHUHLQ

  3ODLQWLII:LOVRQEULQJVWKLVFODLPRQEHKDOIRIKLPVHOIDQGWKH2KLR6XEFODVV

  7KH2&63$LVEURDGO\GUDIWHGDSSO\LQJWRWKHVDOHRIFRQVXPHUJRRGV³WRDQ

 LQGLYLGXDO IRU SXUSRVHV WKDW DUH SULPDULO\ SHUVRQDO IDPLO\ RU KRXVHKROG >XVHV@´ 2+,2 5(9

 &2'($11† $ $FFRUGLQJO\WKHFRQGXFWDWLVVXHLQWKLVFDVHFOHDUO\IDOOVZLWKLQWKH

 VFRSHRIWKH2&36$

  7KH 2&63$ SURKLELWV XQIDLU GHFHSWLYH DQG XQFRQVFLRQDEOH SUDFWLFHV LQ

 FRQVXPHUVDOHVWUDQVDFWLRQVLQFOXGLQJWKHVDOHRIJRRGVId.† $ 

  7KH2&63$IXUWKHUSURYLGHVWKDW³DFRQVXPHU´KDVDSULYDWHFDXVHRIDFWLRQIRU

 YLRODWLRQVRIWKHVWDWXWHDQGH[SUHVVO\DOORZVIRUFODVVDFWLRQVId†

  1LQWHQGR¶V FRQGXFW DV DOOHJHG KHUHLQ KDV EHHQ XQIDLU GHFHSWLYH DQG

 XQFRQVFLRQDEOHIRUSXUSRVHVRIWKH2&63$

  1LQWHQGR DFWHG LQ WKH IDFH RI SULRU QRWLFH WKDW WKHLU FRQGXFW ZDV GHFHSWLYH

 XQIDLU RU XQFRQVFLRQDEOH  0DWHULDO RPLVVLRQV DQG PLVUHSUHVHQWDWLRQV FRQFHUQLQJ JRRGV

 FRQVWLWXWH D YLRODWLRQ RI WKH VWDWXWH  ,W LV DOVR D GHFHSWLYHDFW RU SUDFWLFH IRU SXUSRVHV RI WKH

 2&63$ LI D VXSSOLHU PDNHV UHSUHVHQWDWLRQV FODLPV RU DVVHUWLRQV RI IDFW LQ WKH DEVHQFH RI D

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 93 of 101


 UHDVRQDEOHEDVLVLQIDFWSee 2+,2$'0,1 &2'(† $ see also Nessle v. Whirlpool

 Corp.1R86'LVW/(;,6DW  1'2KLR-XO\ 

  $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V YLRODWLRQV RI WKH 2&63$

 3ODLQWLII:LOVRQDQGWKH2KLR6XEFODVVKDYHEHHQLQMXUHG

  3ODLQWLII:LOVRQDQGWKH2KLR6XEFODVVKDYHVXIIHUHGLQMXULHVLQIDFWDQGDFWXDO

 GDPDJHV LQFOXGLQJ ILQDQFLDO ORVVHV IURP WKH GHYDOXDWLRQ RI WKHLU 6ZLWFKHV DQG -R\&RQV

 UHVXOWLQJIURP1LQWHQGR¶VFRQGXFWDQGSUDFWLFHVLQYLRODWLRQRIWKH2&63$7KHVHLQMXULHVDUH

 RIWKHW\SHWKDWWKH2&63$ZDVGHVLJQHGWRSUHYHQWDQGDUHWKHGLUHFWDQGSUR[LPDWHUHVXOWRI

 1LQWHQGR¶VXQODZIXOFRQGXFW


&2817;;,
 9,2/$7,212)7+(1(%5$6.$&21680(53527(&7,21$&7
1(%5(967$7††et seq ³1&3$´ 
 2Q%HKDOIRI3ODLQWLII<RFKKHLPDQGWKH1HEUDVND6XEFODVV 

  3ODLQWLIIVUHSHDWDQGUHDOOHJHHDFKRIWKHDOOHJDWLRQVDERYHDQGEHORZDVLIIXOO\

 VHWIRUWKKHUHLQ

  7KLV FODLP LV SOHDGHG RQ EHKDOI RI 3ODLQWLII <RFKKHLP DQG WKH 1HEUDVND

 6XEFODVV

  1LQWHQGR¶VFRQGXFWDOOHJHGKHUHLQFRQVWLWXWHVDQXQIDLUPHWKRGRIFRPSHWLWLRQ

 DQGDQXQIDLUDQGGHFHSWLYHDFWLQYLRODWLRQRIWKH1&3$

  7KH 1&3$ SURKLELWV³>X@QIDLU PHWKRGV RI FRPSHWLWLRQDQG XQIDLU RU GHFHSWLYH

 DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\ WUDGH RU FRPPHUFH´ 1(% 5(9 67$7 † 

 1LQWHQGR¶V PLVUHSUHVHQWDWLRQV DQGRU RPLVVLRQV UHJDUGLQJ WKH 6ZLWFK 6ZLWFK -R\&RQV DQG

 WKH 'ULIW 'HIHFW HQWDLOHG GHFHSWLRQ DQG PLVUHSUHVHQWDWLRQ  $V VXFK 1LQWHQGR¶V SUDFWLFHV

 YLRODWHWKH1&3$

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 94 of 101


  $V D GLUHFW SUR[LPDWH DQG IRUHVHHDEOH UHVXOW RI 1LQWHQGR¶V ZURQJIXO FRQGXFW

 DQGYLRODWLRQVRIODZDOOHJHGDERYH1LQWHQGR¶VEXVLQHVVDFWVRUSUDFWLFHVKDYHFDXVHGLQMXU\WR

 3ODLQWLII <RFKKHLP DQG WKH 1HEUDVND 6XEFODVV PHPEHUV  3ODLQWLII <RFKKHLP DQG WKH FODVV

 ZRXOG QRW KDYH SXUFKDVHG RU ZRXOGKDYHSDLGOHVVIRU WKHLU6ZLWFKDQG-R\&RQVKDGWKH\

 NQRZQRIWKH'ULIW'HIHFWZKLFKZDVPDWHULDOWRWKHLUSXUFKDVLQJGHFLVLRQ

  3ODLQWLII <RFKKHLP DQGWKRVHVLPLODUO\VLWXDWHGDUHHQWLWOHGWRUHOLHILQFOXGLQJ

 IXOOUHVWLWXWLRQRIDOOPRQHWDU\VXPVXQODZIXOO\REWDLQHGE\1LQWHQGR

  3ODLQWLII<RFKKHLPGHPDQGVGDPDJHVVXIIHUHGDVDUHVXOWRI1LQWHQGR¶VFRQGXFW

 DOOHJHGKHUHLQWRJHWKHUZLWKWUHEOHGDPDJHVSXQLWLYHGDPDJHVLQWHUHVWFRVWVDWWRUQH\¶VIHHV

 DQGVXFKRWKHUUHOLHIDVWKH&RXUWGHHPVDSSURSULDWH

 &2817;;,,
9,2/$7,212)7+(1(%5$6.$81,)250
 '(&(37,9(75$'(35$&7,&(6$&7
1(%5(967$7††et seq ³18'73$´ 
 2Q%HKDOIRI3ODLQWLII<RFKKHLPDQGWKH1HEUDVND6XEFODVV 

  3ODLQWLIIVUHSHDWDQGUHDOOHJHHDFKRIWKHDOOHJDWLRQVDERYHDQGEHORZDVLIIXOO\

 VHWIRUWKKHUHLQ

  7KLV FODLP LV SOHDGHG RQ EHKDOI RI 3ODLQWLII <RFKKHLP DQG WKH 1HEUDVND

 6XEFODVV

  1LQWHQGR¶V FRQGXFW DOOHJHG KHUHLQ LV D GHFHSWLYH SUDFWLFH LQ YLRODWLRQ RI WKH

 18'73$

  7KH18'73$SURKLELWVinter alia

 D UHSUHVHQWLQJ WKDW WKDW JRRGV RU VHUYLFHV KDYH VSRQVRUVKLS DSSURYDO

 FKDUDFWHULVWLFVLQJUHGLHQWVXVHVEHQHILWVRUTXDQWLWLHVWKDWWKH\GRQRWKDYH



7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 95 of 101


 RUWKDWDSHUVRQKDVDVSRQVRUVKLSDSSURYDOVWDWXVDIILOLDWLRQRUFRQQHFWLRQ

 WKDWKHRUVKHGRHVQRWKDYHDQG

 E DGYHUWLVLQJ JRRGV RU VHUYLFHV ZLWK LQWHQW QRW WR VHOO WKHP DV DGYHUWLVHG RU

 DGYHUWLVLQJ WKH SULFH LQ DQ\ PDQQHU FDOFXODWHG RU WHQGLQJ WR PLVOHDG RU LQ

 DQ\ZD\GHFHLYHDSHUVRQ

  1LQWHQGR¶V 6ZLWFKHV DQG -R\&RQV DUH VROG WKURXJK GHFHSWLRQ DQG

 PLVUHSUHVHQWDWLRQDVVHWIRUWKKHUHLQDQGLQYLRODWLRQRIWKH18'73$

  $V D GLUHFW SUR[LPDWH DQG IRUHVHHDEOH UHVXOW RI 1LQWHQGR¶V ZURQJIXO FRQGXFW

 DQGYLRODWLRQVRIODZDOOHJHGDERYH1LQWHQGR¶VEXVLQHVVDFWVRUSUDFWLFHVKDYHFDXVHGLQMXU\WR

 3ODLQWLII <RFKKHLP DQG WKH 1HEUDVND 6XEFODVV PHPEHUV  3ODLQWLII <RFKKHLP DQG WKH FODVV

 ZRXOG QRW KDYH SXUFKDVHG RU ZRXOG KDYH SDLG OHVV IRU  WKHLU 6ZLWFK DQG -R\&RQV KDG WKH\

 NQRZQRIWKH'ULIW'HIHFWZKLFKZDVPDWHULDOWRWKHLUSXUFKDVLQJGHFLVLRQ

  3ODLQWLII<RFKKHLPDQG WKRVH VLPLODUO\ VLWXDWHGDUH HQWLWOHGWRUHOLHILQFOXGLQJ

 IXOOUHVWLWXWLRQRIDOOPRQHWDU\VXPVXQODZIXOO\REWDLQHGE\1LQWHQGRWKURXJKLWVYLRODWLRQVRI

 WKH18'73$

  3ODLQWLII<RFKKHLPGHPDQGVGDPDJHVVXIIHUHGDVDUHVXOWRI1LQWHQGR¶VFRQGXFW

 DOOHJHGKHUHLQWRJHWKHUZLWKWUHEOHGDPDJHVSXQLWLYHGDPDJHVLQWHUHVWFRVWVDWWRUQH\¶VIHHV

 DQGVXFKRWKHUUHOLHIDVWKH&RXUWGHHPVDSSURSULDWH

  3ODLQWLII <RFKKHLP DOVR VHHNV DQ RUGHU HQMRLQLQJ WKH SUDFWLFHV FRPSODLQHG RI

 KHUHLQ

  





7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 96 of 101


 &2817;;,,,
81-867(15,&+0(17 3/($',1*,17+($/7(51$7,9( 
 
 3ODLQWLIIV LQFRUSRUDWH E\ UHIHUHQFH HDFK SUHFHGLQJ DQG VXFFHHGLQJ SDUDJUDSK DV

WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ

 7KLV FODLP LV SOHDGHG LQ WKH DOWHUQDWLYH WR WKH RWKHU ZDUUDQW\EDVHG FODLPV VHW

IRUWKKHUHLQ

 $V WKH LQWHQGHG DQG H[SHFWHG UHVXOW RI LWV FRQVFLRXV ZURQJGRLQJ 1LQWHQGR KDV

SURILWHGDQGEHQHILWHGIURPWKHSXUFKDVHRI6ZLWFKHVRU-R\&RQFRQWUROOHUVZLWKWKHGHIHFW

 1LQWHQGR KDV YROXQWDULO\ DFFHSWHG DQG UHWDLQHG WKHVH SURILWV DQG EHQHILWV ZLWK

IXOO NQRZOHGJH DQG DZDUHQHVV WKDW DV D UHVXOW RI 1LQWHQGR¶V PLVFRQGXFW DOOHJHG KHUHLQ

3ODLQWLIIVDQGWKH&ODVVZHUHQRWUHFHLYLQJGHYLFHVRIWKHTXDOLW\QDWXUHILWQHVVRUYDOXHWKDW

KDGEHHQUHSUHVHQWHGE\1LQWHQGRDQGWKDWDUHDVRQDEOHFRQVXPHUZRXOGH[SHFW6SHFLILFDOO\

3ODLQWLIIVDQGWKH&ODVVPHPEHUVH[SHFWHGWKDWZKHQWKH\SXUFKDVHGWKHLUGHYLFHVWKH\ZRXOG

QRWEHHTXLSSHGZLWKDGHIHFWLYHMR\VWLFNWKDWZRXOGLQWHUIHUHZLWKJDPHSOD\

 1LQWHQGR KDV EHHQ XQMXVWO\ HQULFKHG E\ LWV IUDXGXOHQW GHFHSWLYH XQODZIXO DQG

XQIDLU FRQGXFW DQG LWV ZLWKKROGLQJ RI EHQHILWV DQG XQHDUQHG PRQLHV IURP 3ODLQWLIIV DQG WKH

&ODVVDWWKHH[SHQVHRIWKHVHSDUWLHV

 (TXLW\DQGJRRGFRQVFLHQFHPLOLWDWHDJDLQVWSHUPLWWLQJ1LQWHQGRWRUHWDLQWKHVH

SURILWVDQGEHQHILWV

 








7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 97 of 101



&2817;;,9
 '(&/$5$725<5(/,()
3/($',1*,17+($/7(51$7,9(727+(&2175$&7%$6('&/$,06 
 2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKHVWDWHVXEFODVVHV 

  3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ

  7KLVFODLPLVSOHGLQWKHDOWHUQDWLYHWRWKHRWKHUZDUUDQW\EDVHGFODLPVVHWIRUWK

 KHUHLQRQEHKDOIRIWKH1DWLRQZLGH&ODVV

  1LQWHQGRPDQXIDFWXUHGSURGXFHGWHVWHGLQVSHFWHGPDUNHWHGGLVWULEXWHGDQG

 VROGWKH6ZLWFKDQG-R\&RQFRQWUROOHUVZKLFKFRQWDLQWKHGHIHFWDVGHVFULEHGKHUHLQ

  7KHUH H[LVWV DQ DFWXDO FRQWURYHUV\ RYHU ZKLFK WKLV &RXUW KDV MXULVGLFWLRQ

 EHWZHHQ3ODLQWLIIVDQG1LQWHQGRFRQFHUQLQJWKHLUUHVSHFWLYHULJKWVGXWLHVDQGREOLJDWLRQVIRU

 ZKLFK3ODLQWLIIVGHVLUHDGHFODUDWLRQRIULJKWVXQGHU1LQWHQGR¶VZDUUDQW\3XUVXDQWWR86&

 †  RU LQ WKH DOWHUQDWLYH WKH VWDWH GHFODUDWRU\ MXGJPHQW ODZV RI WKH VWDWHV LQ ZKLFK

 3ODLQWLIIVRU&ODVVPHPEHUVUHVLGHWKLV&RXUWPD\GHFODUHWKHULJKWVDQGOHJDOUHODWLRQVRIDQ\

 LQWHUHVWHGSDUW\VHHNLQJVXFKGHFODUDWLRQZKHWKHURUQRWIXUWKHUUHOLHILVRUFRXOGEHVRXJKW

  1LQWHQGRZDUUDQWVDQGDGYHUWLVHVWKHUHOLDELOLW\DQGZRUNPDQVKLSRIWKH6ZLWFK

 DQGWKH-R\&RQV3ODLQWLIIVFRQWHQGWKDW1LQWHQGREUHDFKHGLWVZDUUDQWLHVWR3ODLQWLIIVDQGWKH

 &ODVV PHPEHUV ZKHQ WKH\ UHFHLYHG WKHLU 6ZLWFKHV DQG -R\&RQV DW WKH WLPH RI WKH SXUFKDVH

 WKDWZHUHZRUWKOHVVWKDQZKDWZDVSURPLVHGE\1LQWHQGR¶VZDUUDQWLHV

  1LQWHQGR¶VZDUUDQWLHVH[SOLFLWO\ZDUUDQWPDWHULDOVDQGZRUNPDQVKLSDQGGRQRW

 GLVFODLP RU H[FOXGHWKHGHIHFW RUWKHW\SHRIGDPDJHVXIIHUHGDVDUHVXOWRIWKHGHIHFWLQWKH

 -R\&RQV

  3ODLQWLIIV VHHN D GHFODUDWLRQ RI WKH SDUWLHV¶ UHVSHFWLYH ULJKWV GXWLHV DQG

 REOLJDWLRQV XQGHU 1LQWHQGR¶V ZDUUDQW\ DQG RWKHU SURPLVHV PDGH E\ 1LQWHQGR UHODWHG WR WKH

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 98 of 101


 TXDOLW\DQGZRUNPDQVKLSRIWKH6ZLWFKHVDQG-R\&RQVDQGVSHFLILFDOO\WKDW3ODLQWLIIVDQGWKH

 &ODVV PHPEHUV DUH HQWLWOHG WR UHFRYHU WKHLU RXWRISRFNHW H[SHQVHV UHODWHG WR UHSDLUV DQGRU

 UHSODFHPHQW RI WKHLU GHIHFWLYH DQG XQZRUNPDQOLNH 6ZLWFKHV DQG -R\&RQV XQGHU 1LQWHQGR¶V

 ZDUUDQW\

  6SHFLILFDOO\ 3ODLQWLIIV VHHN D GHFODUDWRU\ MXGJPHQW WKDW 1LQWHQGR¶V ZDUUDQW\

 SURYLGHVFRYHUDJHIRUDQGLVWREHUHDGWRLQFOXGHFRYHUDJHIRUUHSDLURUUHSODFHPHQWRI-R\

 &RQV WKDW H[SHULHQFH WKH GHIHFW  3ODLQWLIIV DOVR VHHN D GHFODUDWRU\ MXGJPHQW WKDW QRWKLQJ LQ

 1LQWHQGR¶VZDUUDQW\GLVFODLPVRUH[FOXGHVZDUUDQW\FRYHUDJHIRUWKHGHIHFWGHVFULEHGKHUHLQ

  $MXGLFLDOGHFODUDWLRQLVQHFHVVDU\LQRUGHUWKDW3ODLQWLIIVDQGWKH&ODVVPHPEHUV

 PD\DVFHUWDLQWKHLUULJKWVDQGGXWLHVXQGHU1LQWHQGR¶VZDUUDQW\$WWKLVWLPH3ODLQWLIIVDQGWKH

 &ODVV PHPEHUV KDYH 6ZLWFKHV DQG -R\&RQV WKDW ZHUH GHIHFWLYH XSRQ SXUFKDVH DQGRU

 FRQWLQXHWRUHPDLQGHIHFWLYH

  3ODLQWLIIVDQG&ODVVPHPEHUVVXIIHUHGGDPDJHVDWWKHWLPHRIWKHLUSXUFKDVHDQG

 KDYH SDLG RU ZLOO KDYH WR SD\ IXWXUH UHSDLU DQGRU UHSODFHPHQW FRVWV DV D GLUHFW UHVXOW RI WKH

 'HIHFWLQWKH6ZLWFK-R\&RQV

 35$<(5)255(/,()

 :+(5()25( 3ODLQWLIIV RQ EHKDOI RI WKHPVHOYHV DQG DOO RWKHUV VLPLODUO\ VLWXDWHG

 KHUHE\UHTXHVWWKDWWKLV&RXUWHQWHUDQ2UGHUDJDLQVW1LQWHQGRSURYLGLQJWKHIROORZLQJ

 $ &HUWLILFDWLRQ RI WKH SURSRVHG &ODVV DQGRU 6XEFODVV DSSRLQWPHQW RI 3ODLQWLIIV

 DQGWKHLUFRXQVHOWRUHSUHVHQWWKHSURSRVHG&ODVVDQGQRWLFHWRWKHSURSRVHG&ODVVWREHSDLG

 IRUE\1LQWHQGR

 % $QRUGHUWHPSRUDULO\DQGSHUPDQHQWO\HQMRLQLQJ1LQWHQGRIURPFRQWLQXLQJWKH

 XQODZIXOGHFHSWLYHIUDXGXOHQWDQGXQIDLUEXVLQHVVSUDFWLFHVDOOHJHGLQWKLV&RPSODLQW

7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 99 of 101


 & ,QMXQFWLYHUHOLHILQWKHIRUPRIDUHFDOORUIUHHUHSODFHPHQWSURJUDPDQGQRWLFH

 RIVDPHWRDOOFODVVPHPEHUV

 ' (TXLWDEOHUHOLHILQWKHIRUPRIEX\EDFNRIWKHGHYLFHV

 ( &RVWV UHVWLWXWLRQ GDPDJHV LQFOXGLQJ SXQLWLYH GDPDJHV WUHEOH GDPDJHV

 SHQDOWLHVDQGGLVJRUJHPHQWLQDQDPRXQWWREHGHWHUPLQHGDWWULDO

 ) $Q2UGHUUHTXLULQJ1LQWHQGRWRSD\ERWKSUHDQGSRVWMXGJPHQWLQWHUHVWRQDQ\

 DPRXQWVDZDUGHG

 * $QDZDUGRIFRVWVDQGDWWRUQH\V¶IHHVDQG

 + 6XFKRWKHURUIXUWKHUUHOLHIDVPD\EHDSSURSULDWH

 -85<'(0$1'

 3ODLQWLIIVKHUHE\GHPDQGDWULDOE\MXU\IRUDOOFODLPVVRWULDEOH

 '$7('WKLVWKGD\RI6HSWHPEHU

 7286/(<%5$,167(3+(163//&

 %\s/ Kim D. Stephens   
.LP'6WHSKHQV:6%$
 
%\s/ Jason T. Dennett    
 -DVRQ7'HQQHWW:6%$

 %\s/Kaleigh N.B. Powell    
.DOHLJK1%3RZHOO:6%$
 

 6HYHQWK$YHQXH6XLWH
6HDWWOH:DVKLQJWRQ
 7HOHSKRQH)D[
(PDLO NVWHSKHQV#WRXVOH\FRP
 MGHQQHWW#WRXVOH\FRP
NSRZHOO#WRXVOH\FRP
 

 


7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 100 of 101


 %HQMDPLQ)-RKQV pro hac vice 
$QGUHZ:)HULFK pro hac vice 
 $OH[0.DVKXUED pro hac vice 
&+,0,&/(66&+:$57=.5,1(5
 '21$/'62160,7+//3
:/DQFDVWHU$YHQXH
 +DYHUIRUG3HQQV\OYDQLD
7HOHSKRQH  
 (PDLO EIM#FKLPLFOHVFRP
DZI#FKLPLFOHVFRP
 DPN#FKLPLFOHVFRP

 
Interim Co-Lead Counsel for Plaintiffs and the
 Putative Class































7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ
7(/x)$;

Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 101 of 101


&(57,),&$7(2)6(59,&(

,KHUHE\FHUWLI\WKDWRQ6HSWHPEHU,HOHFWURQLFDOO\ILOHGWKHIRUHJRLQJZLWKWKH
 &OHUNRIWKH&RXUWXVLQJWKH&0(&)V\VWHPZKLFKZLOOVHQGQRWLILFDWLRQRIVXFKILOLQJWRDOO

 SDUWLHVUHJLVWHUHGRQWKH&0(&)V\VWHP$OORWKHUSDUWLHV LIDQ\ VKDOOEHVHUYHGLQ

 DFFRUGDQFHZLWKWKH)HGHUDO5XOHVRI&LYLO3URFHGXUH
'$7('DW6HDWWOH:DVKLQJWRQWKLVWKGD\RI6HSWHPEHU





s/ Kim D. Stephens
 .LP'6WHSKHQV




























7286/(<%5$,167(3+(163//&
6HYHQWK$YHQXH6XLWH
),567$0(1'('&/$66$&7,21&203/$,17 - 96 6HDWWOH:DVKLQJWRQ
7(/x )$;